John Hutton: I reject my right hon. Friend's suggestion that the chief executive of the CSA is not doing a proper job. He is doing a proper job, and that is why the performance of the agency is beginningto improve in several important areas. We set out proposals in last year's White Paper to bring about significant changes to the system of child support in our country, and I hope that my right hon. Friend will support those changes.

John Hutton: We are determined to try to improvethe operation of the CSA as much as possible. I understood that there was a consensus between the two sides of the House on the changes that were necessary. I also understood that Conservative Members supported the changes that we were trying to make through the operational improvement plan for the CSA. I am not aware that the hon. Lady and her colleagues have any other proposals to put forward.

John Hutton: We are making £120 million of additional investment available over the next three years to support the turnaround in performance that is wanted by all hon. Members, including my right hon. Friend. The first year of the additional investmentwas spent primarily trying to improve training and recruit additional staff so that we could bring about improvements in the processing of new applications.As I said in reply to the hon. Member for St. Albans (Anne Main), the length of time that it takes to process new applications is coming down.

Jim Murphy: There are more lone parents in work than ever before, and part of that success is because of regular work-focused interviews. Mostlone parents think that the experience is useful and, crucially, the contact with advisers means that they are aware of the range of help and support that is available to assist them in their return to work.

Lynne Jones: I am disappointed that my hon. Friend has not quoted any of the studies that the Department has had carried out on its behalf, but given the success of the voluntary new deal for communities programme, and the fact that 69 per cent. of lone parents whose youngest child is over 12 are in work, what would represent better value for money: spending more money on more compulsory interviews and signings-on, or spending money on removing the barriersto work identified in the studies that have been undertaken for his Department?

Mary Creagh: One of the biggest concerns for any lone parent accessing work is accessto affordable child care. Workers at the Sure Startin St. Swithun's in Eastmoor in my constituency of Wakefield have told me that they have noticed a trend, in which people access work just before Christmas, so that they can save up money to buy Christmas presents and get through the festive season, and then take their children out of child care and go back on benefits afterwards. Is that a trend that the Department has noticed, and if so, how can we better help those parents to stay in work?

Jim Murphy: I have not noticed or had any reports of situations along the lines that my hon. Friend suggests, but I am of course happy to listen to the specifics of her experience in her constituency or elsewhere. She is right to identify the need to provide more support for lone parents to be in sustained employment, because across the welfare system many people who wish for the chance to work and are determined to do so gointo part-time or temporary work and go through a revolving door in the welfare system. The Freud report and a series of other reports put a firm emphasis on ensuring that work is sustained and well paid.

Jim Murphy: In a devolved sense, some of the detail of that is part of the approach of the Welsh Assembly and the Scottish Executive. However, given the increased role in welfare for the private and voluntary sectors, it is also about the involvement of community groups, faith organisations and trade unions at a local level to support people in giving them the chance to get back into work. My hon. Friend is right about our different profile compared with Scandinavia. Thereare two differences between our country and those countries. First, as regards the availability of child care, they have had decades of investment, whereas we are catching up after decades of under-investment. Secondly, we have the most liberal—if my hon. Friend will pardon my using that word—approach to job search for lone parents of any major European nation.

David Taylor: A large swathe of households below average income has significant difficulty in accessing welfare benefits and entitlement. To what extent does the Secretary of State believe that the Freud report has addressed those specific problems? Will he encourage hon. Members to attend a valuable Public and Commercial Services Union seminar on Wednesdayat 5 pm in Committee Room 16, where all will be revealed?

David Ruffley: Fighting poverty is a priority for all politicians but in March, the Government's figures showed that the number of our fellow citizens in severe poverty had increased by 600,000 in the past 10 years. It is said that, in the past year, the total number of individuals in poverty—with less than 60 per cent. of median income before housing costs—rose from 10 million to 10.4 million, and that poverty among working age adults rose from5 million to 5.4 million. The Secretary of State's figures show that poverty is getting worse. Why?

John Hutton: I wish it were true that tackling poverty was an issue for all politicians. That is not whatthe history books tell us about the Conservative Government's record. Child poverty doubled underthe Conservative Government and it is now falling significantly for the first time in a generation because of our measures. If the hon. Gentleman had a record about which he could boast, I would seriously take something from it. He has no such record.

Greg Hands: What plans his Department has to strengthenits mechanisms for tackling income support fraud.

John Hutton: In October 2005, we published new proposals for reducing benefit fraud. Fraud in income support is now at the lowest level since figures were recorded: down from an estimated £550 million in 1997-98 to around £200 million in 2005-06. That equates to a drop from 6.7 per cent of income support expenditure to 2.1 per cent.
	We are determined to make further reductionsin fraud, for example, by trying new data-matching initiatives with credit reference agencies.

Philip Dunne: I thank the Minister for that answerand look forward to reading his statement. Lastweek, facing a Back-Bench revolt, the Chancellor wasforced to expand his Budget measures to cover solvent schemes. He seems able to commit funds for pensioners when it suits him, but when a cross-party agreement for a solution is put forward, he rejects it out of hand. Surely what pensioners need now is not just another review, but action and payment in respect of pensions that many people saved a long time for, but may not live to receive.

James Purnell: I have looked at the proposed amendment and have found that it promises to pay90 per cent., without saying how it can be funded. There is a word in the pensions sphere for guaranteeing pensioners a certain level of income with no guarantee to fund it—and the word is mis-selling. That is exactly what the Opposition are doing.

Derek Wyatt: May I ask my hon. Friend about the timetable for the unclaimed pension assets—he said that a statement was due some time before the recess—and whetherthe measures will need primary legislation? Are any pension funds, such as Legal and General or Prudential, not co-operating with this process and, if so, how are we going to get them to co-operate?

James Purnell: The hon. Gentleman has just illustrated why the proposal needed to be rejected; he contradicted himself in the space of one sentence. Either there is a taxpayer guarantee, in which case his shadow Chancellor was wrong last week to say that there was no public spending commitment involved, or this is mis-selling the Conservatives' policy? Whichis it?

Anne McGuire: As a result of reform, around 1 million more people will build up entitlement to the state second pension from 2010,90 per cent. of whom will be women.

John Robertson: I thank my hon. Friend forher answer. As a Member of Parliament whose constituency has one of the highest percentages of women, I am naturally concerned about the treatment of women. Does my hon. Friend agree that the low take-up of the state second pension among women might be due to the fact that they are still being paid less than men? Of course, it could be that they are going for other pensions that are more favourable, but what are the Government doing to investigate why there is such a low take-up of the state second pension?

Diana Johnson: May I ask my hon. Friend to look atthe position of people with mental health problems, particularly given the scheme that operates in Hull through the local branch of Mind? It is called Mindful Employer, and it offers support and encouragement to local employers to employ people with mental health problems, so will he look at whether it can be rolled out across the country to support employers?

Jim Murphy: I am not sure that there is a job for life for many people in today's labour market in a world of globalisation. Nevertheless, there is a significant task ahead concerning the skills and aspirations of many young people. Of course there has been progress in recent years on the number of young people not in employment, education or training, but we have to go further. One way of doing so is perhaps raising the school leaving age; another is continuing to make a success of the new deal, which has transformed the lives of hundreds of thousands of young people andis a policy that was, and still is, opposed by the Opposition.

Jim Murphy: My hon. Friend is right, and that is why 250 people have come off an inactive benefit, with the chance to go into work in many cases, every day over the past 10 years. My hon. Friend is right toallude to the remarkable work done by Jobcentre Plus in supporting people to get into work in many communities and towns across the country. But, clearly, Jobcentre Plus cannot, and should not, be asked to do that job on its own. Increased involvement by the private and voluntary sector, community organisations, and—as I have alluded to—faith groups and trade unions in communities is also important in supporting more people into sustained employment.

Desmond Swayne: I was visited recently by a constituent who has lost not one, but two, pensions, and who falls outside theFAS. He complained to me that when he chided his daughters for not contributing to a pension scheme, they replied that he was a mug for having done so. Until Ministers are prepared to grasp the nettle,which our amendments last week offered them the opportunity to do, there is every likelihood that people who save for a pension will simply be told that it is a mug's game.

James Purnell: We have grasped the nettle. We have introduced an amendment that guarantees at least80 per cent. of what people have lost. We are examining how that can be supplemented. We are not prepared to make empty promises, which have been described by the Association of British Insurers as, robbing Peter to pay Paul, or as yet another raid on pensions, which should not be done. We are saying that we shouldhave a proper review. I would say to his constituent's daughters that we now have the Pension Protection Fund, which does provide a safety net for people in the future. The Labour party tabled proposals for that in the 1995 Pensions Bill. If the hon. Gentleman's party had supported them, we would be in a very different situation now.

James Purnell: It is not right to promise people money that we do not know how to deliver. That is not the right type of politics. The shadow Chancellorsaid that a test of the Opposition's credibility as a Government was whether they were going to come up with more unfunded promises on pensions. That is exactly what they have done. Voters will draw their own conclusions on the credibility of the Opposition party to be in government.

Jim Murphy: My hon. Friend has championed the city strategy approach for some months now, not least because Nottingham is, uniquely, the sixth richest city in the country and the seventh poorest. He also chairs the consortium in Nottingham. Let me say to him and, through him, to the partnership in Nottingham that we are looking for a real change in outcomes. Of coursewe have to get the processes right, but it is the transformation of people's lives that is important. In that sense, we have set aside additional money to incentivise further success so that the consortiums can share in the success of getting people off benefit and into work. That announcement was made to the 15 city consortium pathfinders when we set out the details of the flexibilities to them recently.

James Purnell: Our latest estimates show that in November 2006 there were 6,130 households—7,810 individuals—in the parliamentary constituency of Waveney receiving pension credit. Across Great Britain, there were2.7 million households—3.3 million individuals—receiving pension credit. This is nearly 1 million more than received the minimum income guarantee that preceded it.

James Purnell: The average amount that people get from pension credit is just under £50 a week. A quick off-the-top-of-the-head calculation would suggestthat about £13 million a year goes into the Waveney constituency from pension credit—a measure that was opposed by the Conservatives and was described last week by their Front Bench as a cancer.

Bob Spink: I am grateful for the hon. Gentleman's response. He will recall that earlier today his right hon. Friend the Secretary of State said that there was a backlog of 200,000 cases with the CSA. What assessment does the hon. Gentleman make of thework of the Select Committee on Work and Pensions, which indicates a far higher level of problems and backlog? Does he accept that the backlog is causing real problems for vulnerable people in all our constituencies? What further will he do to clear that backlog quickly?

James Plaskitt: As I told the hon. Gentleman, the backlog is now being reduced. It was reduced by 13 per cent. in just the first year of our operational improvement plan, and the targets that we have set for the agency include the clearing of 80 per cent. of cases within 12 weeks by 2009. The substantial improvement achieved in the first year will continue. If the hon. Gentleman wants to know what more is being done to support that improvement, I suggest that he read the detailed information that we have made available about reforms to the agency's information technology system. When we examined it at the start of the operational improvement plan, it contained 500 defects. More than half those defects have now been fixed, includingall the important ones. Additional investment, new processes and new ways of working for staff are helping us to make rapid progress in reducing the backlog.

Paddy Tipping: As the hon. Gentleman is aware, my right hon. Friend has received regular representationsabout the case for a business Committee. The proposal has been raised in evidence to the Modernisation Committee's current inquiries into the role of Back Benchers and the use of non-legislative time. I think it best to let the Committee make its recommendations on the matter.

Nicholas Winterton: I welcome the Deputy Leader of the House back to the Front Bench. He is a thoughtful and kindly man who is deeply committed to the procedures of this House. Does he not accept that people are increasingly concerned that what takes place in this House is not topical, and does he not agree that if Back Benchers were represented on a business Committee of this House not only would more topical debate be part of debate during the week—not only on a Friday, although I support the hon. Member for Nottingham, North (Mr. Allen) in his question—but that that would be more relevant and topical for the people of this country? That is one of the objectives of the current Modernisation Committee inquiry.

Paddy Tipping: Well, let me agree with that last point, and say to my hon. Friend that she has been a strong supporter over many years of more motions coming before the House and for the debates tobe on substantive motions, not motions for the Adjournment. My right hon. Friend the Leader of the House is committed to trying to ensure that that happens further.

Nick Harvey: I thank the hon. Gentleman for his positive remarks about the network in general. It is recognised that there are problems with the remote access to the network and a programme of work is under way to improve the way in which that operates.I hope that as time goes on that will prove to be successful and that external users will get the same satisfaction that internal users generally report.

Nick Harvey: The taxpayer would pay considerably more if 646 Members each procured their own IT arrangements rather than it being done collectively. Overall, the performance of the network is extremely reliable. It is recognised that there are problemswith some of the other services, but the right hon. Gentleman should not underestimate the scale of the task that PICT faces. These are early days. The joint department for the two Houses has only just been formed, and time will tell in the next few months as to whether it is able to improve the service. Generally, Members seem fairly satisfied with it.

Damian Green: On a point of order, Mr. Speaker. I seek your guidance on a written answer given on 16 April by the Minister for Local Environment, Marine and Animal Welfare, the hon. Member for Exeter (Mr. Bradshaw), in which he listed local councils that provide only fortnightly rubbish collections. He included Ashford borough council on that list, but that is factually wrong. Ashford borough councils provides a weekly collection service—

[Relevant document: th e Fifth Report of the Treasury Committee, Session 2006-07, on the 2007 Budget,HC 389-I and —II.]
	 Order for Second Reading read.

Stephen Timms: I beg to move, That the Bill be now read a Second time.
	At the time of the Budget, my right hon. Friend the Chancellor was able to set out an upbeat account of the state of the British economy. It was not just my right hon. Friend, however: I draw the House's attention to the International Monetary Fund's report on the UK economy in February, which referred to
	"a decade-long record of strong and steady macroeconomic performance",
	and pointed out that
	"growth of real GDP per capita was higher and less volatile than in any other G7 country".
	We have seen a remarkable transformation of the British economy over the past decade. Uniquelyamong major economies we have avoided a downturn; 29 million people are in employment for the first time ever and gross domestic product per capita is up from seventh to second in the G7 and the economy is growing faster this year than in every other G7 economy. Locking in that new stability, avoiding risks to it and sticking to our fiscal rules are the immovable constraints around which the Budget and the Finance Bill were constructed.

John Redwood: Can the Minister explain why 1 million manufacturing jobs were lost in Britain over that decade and why5.3 million people of working age are on benefit with no job?

Stephen Timms: It has, with particularly strong figures in recent months, as I said, which reflect the strengthin manufacturing across the economy. I particularly welcome the strength of the economy in my hon. Friend's region, to which he referred.
	Acknowledging intensifying global competition, the Bill takes the next steps to prioritise investment and innovation. It includes important measures to simplify business tax and to ensure that everybody pays their fair share. With measures to deliver further emissions reductions, incentives to encourage fuel and energy efficiency and further support for renewable energy technologies, the Bill strengthens UK leadership in tackling climate change.

Stephen Timms: My right hon. Friend may be correct about that. Some, no doubt, will find themselves a little worse off next year as a result of the changes in theBill but, by and large, their position will have been considerably strengthened by the other changes over the past 10 years.

Stephen Timms: I welcome the report that has been published today. We will reflect on all the points thatit makes. On the second issue that the hon. Ladyraised, the report does welcome the recent initiatives, including the information that my right hon. Friend the Chancellor gave to the Treasury Select Committee at its meeting on take-up, but there is no doubt that more needs to be done.

Stephen Timms: Inflation is currently at 3.1 per cent., and the hon. Lady may have noticed that the recent sending of a letter by the Governor of the Bank of England to my right hon. Friend the Chancellor was the first time it had happened in 10 years. At the outset, it was expected that that would be required everyyear or two. The system and the macro-economic framework that we have put in place have been remarkably robust and successful. Inflation at 3.1 per cent. is a great deal lower than the rates of inflation that obtained when the party that she speaks for was last in government. At that time, we had double-digit inflation and double-digit mortgage rates. The system continues to work extremely well and the fact that, after 10 years, it has been necessary for a letter to be sent need not give rise to undue concern. Indeed, it is generally agreed by those who study these things that the rate of inflation will fall sharply towards target in the second part of this year.
	From 2008, as I said, there will be a cut in the main corporation tax rate from 30 per cent. to 28 per cent. That is a lower rate than those of all our major competitors and has been widely welcomed by, for example, the Institute of Directors and the City of London Corporation, which said:
	"The City is very pleased that the Government is making such a clear commitment to keeping London competitive".
	There is clear evidence that a lower headline rate of corporation tax attracts foreign direct investment and that the change will strengthen our position further.

Stephen Timms: I shall come to the small companies corporation tax rate in a moment, but let me say a little more about how we are funding the welcome and significant reduction in the main rate. It is being funded by modernising and streamlining the capital allowances system, which has been largely unchanged for the past 20 years and which, in part, still reflects the needs of post-war redevelopment. This is the most extensive reform of investment allowances since the 1980s, better aligning allowances for buildings and plant with economic depreciation, removing tax-driven distortions in business decisions and giving incentives for long-term investment.
	My right hon. Friend announced just two rates in future for capital allowances—20 per cent. for short life assets and 10 per cent. for long life assets. Clause 35 paves the way for phasing out over four years industrial and agricultural buildings allowances, so removing a selective and outdated subsidy for some buildings, which is not available, for example, for commercial office space or for science parks. It is a strong package, pro-growth and pro-investment, which is expectedto add 0.2 percentage points per annum to investment above the trend rate, strengthening our global competitiveness.
	The Bill also sets the small companies rate of corporation tax at 20 per cent. for 2007. We have announced that we will raise it further to 22 per cent. from April 2009 as we remove incentives to incorporate solely for tax reasons. As the Red Book shows, setting out the figures for this year and the following two years, all the proceeds from that increase will be recycled to small businesses that invest, through a package that reduces the tax due from them and gives them incentives to invest, with current first year capital allowances for small firms maintained in the Bill at50 per cent. until April 2008, and the Finance Bill next year to introduce a 100 per cent. annual investment allowance of £50,000 for all firms. That shifts the incentives in favour of investment, which will further strengthen small firms.

Stephen Timms: Perhaps the hon. Lady will tell us when she speaks whether her party would reverse the change. We are using the tax system to improve the incentives for investment and thereby strengthening businesses, particularly the wealth-creating, job-creating businesses. I have no doubt that as a result of this package the economy will be strengthened further. It is a matter of using the available incentives in the right way, as we are doing. There will be a significant cash-flow benefit to small businesses that reinvest their profits, offsettingthe small companies rate increase for small companies that are investing.
	Through clause 50 and schedule 16, the Bill reforms venture capital trusts, the enterprise investment scheme and the corporate venturing scheme. Those measures will give greater certainty to investors and the companies in which they invest and help to secure the future of the schemes, which have been very valuable. All the yields from those changes are being recycled to fund enhancements in research and developmenttax credits to strengthen further innovation and productivity in the UK. These measures will encourage investment and innovation, promote competitiveness and help to equip the UK to meet successfully the challenges of globalisation ahead.

Stephen Timms: No, I do not think that I am. Of course, I am not familiar with the figures that the hon. Gentleman is quoting, but I suspect that he is including a large number of self-employed individuals. I am certainly not overstating the benefits. He will see in the Red Book the analysis of the additional revenue raised from the change in the small companies rate and the additional sums being relieved through the changes that I have described. Over the period set out, all the proceeds are being recycled.
	The Budget extended support to hard-working families. It announced tax changes to help more people into work and to boost further the incentives for employment. But for 2007-08, in the Bill income tax rates are unchanged at 10 per cent., 22 per cent. and40 per cent. The personal tax reforms set out in the Budget, amounting in total to a reduction in personal taxation of £2.5 billion, will come into effect from April 2008 and will be contained in the Finance Bill next year.
	Clause 4 of the present Bill will increase the nil rate band for inheritance tax to £350,000 for the financial year 2010-11, maintaining recent practice of pre-announcing nil rate band increases for future years. That means that 94 per cent. of estates are expected to pay no inheritance tax, with transfers of assets to spouses, civil partners and charities, of course, exempt.

Stephen Timms: If the hon. Lady looks at the arithmetic set out in the Red Book, she will see that the package has been carefully designed. There will be changes next year, balanced by other changes, which are all set out. The phasing of those changes is consistent with our commitments both to fairness and to stability in the economy as a whole.
	Part 3 of the Bill includes important changes to ensure that everybody pays their fair share of taxation. We remain firmly committed to advancing fairness by tackling tax avoidance, as well as fraud. For example, clause 25 ensures that workers providing their services through managed service companies pay the same income tax and national insurance as those who provide their service as employees.
	The Bill also takes the next steps in our response to the Stern report. It introduces further measures to protect the environment, building on the success ofthe climate change levy in tackling carbon emissions, supporting the introduction of carbon trading, reflecting our commitment to tackle climate change through effective international action, and providing incentives for change while maintaining our other economic and social objectives. Changes in clause 11 to vehicle excise duty sharpen the environmental signals to motorists to purchase more fuel-efficient cars. Clauses 17 to 19 introduce a range of other measures to encourage energy efficiency.

Stephen Timms: I am going to make a little more progress.
	Clauses 20 and 21 encourage the use of domestic microgeneration by helpfully and supportively clarifying the tax rules. The increases in the rates of fuel duty will help to reduce polluting emissions from road transport.
	Clause 12 doubles the rate of air passenger duty with effect from 1 February 2007. I know that the principle of increasing the tax burden on aviation is supported by hon. Members on both sides of the House. The change reflects better the principle that the sector should meet its environmental costs. It is estimated that the measure will save 300,000 tonnes of carbon a year by 2010-11. Of course, we continue to work to ensure that aviation is included as soon as possible within the European Union emissions trading scheme, which is the right long-term solution. Taken together, measures outlined in the Budget will deliver a carbon savingof 6 million tonnes. They will also strengthen theUK's leadership on critically important international decisions that alone can deliver the worldwide changes that we need.

Stephen Timms: The figure that I cited is the difference between the emissions after the change to APD and the amount if there was no change.
	The Bill is the right next step in extending further our decade-long record of economic success, stability, growth, investment and fairness that my right hon. Friend the Chancellor set out in the Budget. It promotes the international competitiveness of theUK economy because maintaining our success on competitiveness is vital to the prosperity of every family in Britain. The Bill provides further protection for the environment to ensure not only that we stay on track to exceed our Kyoto commitment, but that we strengthen UK leadership internationally. Our aims are to build on the longest period of economic stability and sustained growth in Britain's history, with a strong economy alongside a strong society, the right balance among tax, spending and borrowing, and Britain equipped to address successfully the long-term challenges of the future. The Bill takes those important next steps and I commend it to the House.

Theresa Villiers: I beg to move, To leave out from "That" to the end of the Question, and to add instead thereof:
	"this House declines to give a second reading to the Finance Bill because it fails to equip the UK to compete in the globalised world economy in the face of ever increasing competition from countries such as China and India, penalises small companies with higher tax rates and a more complicated tax system, hits freelance workers with more tax bureaucracy and uncertainty, involves yet further instability and U-turns on pensions policy and does nothing to tackle the UK's worsening pensions crisis, gives HM Revenue and Customs intrusive and disproportionate new powers of investigation, misses the opportunity to provide effective mechanisms for tackling climate change, fails to reform the UK tax law after years of erosion of its competitiveness, and fails to reverse the massive increase in complexity and instability which the Chancellor has inflicted on the tax system of the UK."
	This Finance Bill might not be quite as long as last year's—the Government have been able to squeeze it into a single volume—but that cannot make up forthe massive increase in complexity and continuing instability that we have seen during the Chancellor's10 years in charge of our tax system. Recent reports from Grant Thornton and Ernst and Young highlight the erosion of our competitiveness that has been caused by the complexity of a tax code that has doubled in length during that decade. We believe that there is an urgent and pressing need for tax reform. If the Government shirk the challenge, there is a real risk of an outflow of jobs to other countries. The limited steps in the Bill towards simplification and reform do not meet that challenge, which is one of the key reasons why we decline to give it a Second Reading.
	Let me begin with clause 1. The right hon. Member for Birkenhead (Mr. Field) asked why our reasoned amendment did not cover the income tax changes announced in the Budget. As I said in an intervention, that is because they are not in the Bill. However, we remain concerned about the proposals that will be imposed next year, and my hon. Friend the Member for Rayleigh (Mr. Francois) will deal with that matter in his winding-up speech.

Kitty Ussher: I have listened to the hon. Lady's speech but I am slightly confused, because she quoted a business man saying that businesses seeking to grow would lose out, but a few momentsago another Opposition Member, the hon. Memberfor Falmouth and Camborne (Julia Goldsworthy), admitted that the Government's proposals will help firms that seek to invest.

Theresa Villiers: The hon. Lady makes a good point, and one of the big disadvantages of the increasing complexity in the tax system is that it is more difficult for micro-businesses to make sense of it. Small companies such as hairdressers, newsagents, post offices and one-man businesses will be badly hit by the Bill, because it is not feasible in all cases for them to invest at significant levels.
	In a double whammy, the Chancellor has hit small service businesses again in schedule 3, on managed service companies. Let me make it clear that we support attempts to crack down on abuse and abusive behaviour. Of course people who are not genuine freelance contractors but are in reality in a relationship with their end client that amounts, to all intents and purposes, to employment, should pay their fair shareof tax. However, it sometimes seems as though the Government think that all freelancers are tax dodgers. They are not, and those who are genuinely outside an employment relationship should not be penalised for making that choice about their working life. Flexible contract working is an important part of our economy, and it is invaluable in allowing businesses to respond quickly to changes in demand and innovations in the market. In particular, it plays a vital role in the IT sector, which, as I am sure the Chief Secretary will agree, is a crucial area for maintaining our economic competitiveness in a globalised world.
	In seeking to crack down on abusive behaviour, the Government are in danger of hitting all contractors who have incorporated and chosen to outsource some of the administration and finance connected with their company. Whether someone is a genuine freelancer is irrelevant to the operation of schedule 3. It looks as if more or less any involvement with a third-party organisation that provides regular services to contractors and assists them with the operation of their service companies could bring the freelancer and her company within the new managed service companies legislation and completely change her tax status.
	One of the worrying consequences of these proposals is that many contractors who have—understandably, given the complexity in the tax system and in regulation— allowed an adviser to take some of the burden of administration off their shoulders will have to set up their own personal service companies. They will no longer be able to outsource day-to-day corporate administration to an adviser. On top of an increase in tax rates and an increase in tax complexity, freelancers will have the hassle and bureaucracy of registering and running their own company into the bargain.

Theresa Villiers: There are many ways in which we need seriously to reform the tax system so that it becomes much simpler, and in due course we will come forward with detailed proposals.
	According to the Institute of Chartered Accountants, we are already seeing the symptoms of the changes involving managed service companies, because well over 56,000 new companies were registered in February—around double the usual monthly figure. Freelancers, as well as having to set up their own companies and being unable to outsource, are likely to see the bill for professional advice go up because of the risk that their advisers could find themselves caught by the definition of a managed service company provider; those professionals could find themselves liable for the tax debts of their clients. It is difficult to know in advance how the carve-out for professional advisers in proposed new section 61B(3) will be interpreted. While some basic accountancy and legal services may steer clear of the rocks, how will everyday tax advice, company formation and company secretarial work be treated? We will have to wait for a court decision before we can understand the legal position with confidence, leaving freelance workers and their professional advisers in an expensive limbo in the meantime.
	The Contractors UK website reported many contractors feeling that
	"this latest legislation is just part of an inevitable ongoing revenue attack. Freelance contractors are a valuable section of our flexible workforce, and once again, they feel victimised by this assault on their livelihoods."
	Freelance software development expert Mr. David Hazell recently wrote that the Chancellor
	"and his ilk have spent the last 10 years slowly twisting the public view of my chosen way of keeping myself in work to something akin to benefit fraud. Contractors are not tax dodgers, and they have better things to do with their time than spend it getting their heads around Gordon's corkscrew-like reinterpretations of tax and company law."
	Martin Hesketh, who provides professional services to freelance workers, said:
	"The UK economy relies heavily on people freelancing, and the Government has promoted this 'flexible' way of working for some time now to attract more people into the work force. However, the new rules seem to work against the Government's own agenda. Not only are they adding more confusion to this already complex market, but...are also requiring contractorsto take on additional layers of legal and accounting responsibilities—something they've clearly not asked for".
	A major plank of the Government's proposals is not even in the Bill for scrutiny this afternoon. Their highly controversial draft rules on making third parties liable for other people's tax debts are still to come, so we only have part of the picture—the rest is to be inserted via regulations. Yet clause 25 would bring the rules into effect from 6 April. People are being asked to deal with that upheaval even before the rules have been finalised and agreed by the House.
	The Chancellor's attack on enterprise and small business start-ups continues in schedule 4 with the restrictions imposed on sideways loss relief. Underthe Bill, it seems that people are damned if theydo incorporate and damned if they do not, with schedule 4 hitting business partnerships. Restrictingthe ability to set off partnership losses against other income could have an impact on several important high-risk investment areas.
	Several concerned entrepreneurs have contactedme about sideways loss relief, including Mr. Antony Blakey, who told me that many investors and scientists were worried about the impact on private collective investment. He told me that
	"we now have a serious problem for environmental research and small business start-ups."
	Film production is an example of something that could be negatively affected. I acknowledge that not everyone in the film industry is worried, especially since the Government carried out their spectacularly rapid U-turn on applying the rules to section 42 and section 48 reliefs. However, some in the film industry are worried, and concern about schedule 4 stretches to several other sectors, including the multi-billion-pound computer games industry, in which the UK has such an important opportunity to compete alongside the best in the globalised world economy.
	I have also received representations about the damage that schedule 4 could do those trying tomake use of the special capital allowances that the Chancellor introduced to encourage environmental projects. Biotech investment could also be hit. Rupert Lywood of Matrix Securities contacted me about a project to develop cancer vaccines. He told me that it would have been much harder to get that off the ground without sideways loss relief, because it would have been difficult to find a single investor who could fund the entire project. To get the necessary critical mass of investment for such high-risk projects, one generally needs several investors and, consequently, a partnership.
	If investors can no longer relieve losses against other income, the risk increases and ventures find it more difficult to get financial backing. In many cases, spending 10 hours a week on the project, as requiredby the new rules, simply would not be practical. Mr. Lywood tells me of a business venture concerning Down's syndrome and genetic diseases, which is now in jeopardy as a result of schedule 4.
	Again, it is true that avoidance has occurred, and we support attempts to crack down on abusive schemes, but the Government already have extensive tools with which to deal with partnership-based avoidance. Schedule 4 fails to distinguish between abusive and non-abusive schemes. We need to find a way to save sideways loss relief for projects undertaken for genuine commercial and entrepreneurial motives rather than for tax reasons, and we will table amendments in Committee to bring that about.
	Coupled with the new restrictions on venture capital trusts in clause 50, schedule 4 comes as a body blow to enterprise in Britain, and we desperately need to encourage enterprise if more jobs are not to be sent offshore to India and China.
	Let us consider the Bill's proposals on green issues. Tony Juniper of Friends of the Earth said that the measures announced were "disappointingly weak" and described the Chancellor's record as "woeful". During his 10 years at No. 11, green taxes have been falling as a proportion of total tax receipts. The much-hyped climate change levy is flawed because it targets the use of energy rather than focusing on carbon emissions. The Renewable Energy Association branded the low carbon buildings programme a fiasco. Clause 19's stamp duty exemption for zero carbon homes will make a minimal difference, especially as the Chief Secretary cannot tell us with certainty whether any houses in the entire country qualify for that relief.
	The Chancellor's tax break for microgenerated energy sold back to the national grid is not exactly a big giveaway, since HMRC admits that it has never collected income tax on such payments to date. The Renewable Energy Association called the £22 a year that that might save home owners
	"a drop in the ocean".
	The Bill may contain provisions that are labelled as environmental, but it is not a genuinely green Finance Bill.
	Part 6 deals with powers. Of course we acknowledge the importance of ensuring that the authorities have the right tools to fight tax fraud and organised crime such as missing trader intra-Community—MTIC—fraud. However, we also agree with the Chartered Institute of Taxation about the importance of
	"ensuring those powers are used only by those who need them and are subject to proper control."
	We welcome the extensive consultation carried out on that issue. There has certainly been an improvement since the initial draft, which took an Inspector Gene Hunt-type approach: "Kick the door down first and ask questions afterwards." Real progress has been made since the "PACE is for wimps" stance with which some of the proposals started. However, there are still a number of instances where the criminal powers granted by clause 81 to HMRC exceed those given to the police under the Police and Criminal Evidence Act 1984, so we will scrutinise those proposals with care.
	Vesting responsibility for both civil and criminal investigation in the hands of a single body does give rise to certain risks; I am sure the Chief Secretary will acknowledge that. HMRC's criminal investigation officers should be separate and distinct from the rest of the organisation. There needs to be a limit to the range of people who can exercise the very considerable powers that the Government are asking the House to sanction in the Bill. We do not want to see every tax inspector given a power of arrest, so we seek assurance from the Government that the draconian powers to tackle smugglers that have built up at Customs and Excise over the years will not be allowed to leak into HMRC's civil jurisdiction.
	Without even getting into the issue of the ferocious powers already vested in the Revenue and Customs Prosecution Office, we would welcome the clearest guarantees from the Financial Secretary in his summing up that that the powers of arrest and investigation contained in the Bill will not be used in the context of HMRC's day-to-day tax collection duties. We hope and trust that he will also be able to assure us that submitting a late tax return will not mean a dawn raid and frozen bank accounts.

Theresa Villiers: Getting the derogation is certainly welcome, but it is deeply regrettable that it has comeat the expense of our rebate. The Prime Minister's original decision to give £7.2 billion more of our money to the EU is regrettable, and the Chancellor is only confirming that in the negotiations on MTIC. That is indeed of great concern to Conservative Members.
	Lastly I turn to pensions, and clauses 67 and 68. Clause 67 is not a particularly high-profile partof the Bill. It removes tax relief from somethingcalled pensions term assurance. On 6 April 2006, as probably every hon. Member knows, the Government introduced new rules on certain types of life cover as part of their A-day reforms, which included new rules on certain types of life cover. Their aim, they said, was to increase fairness, but their premise seemed to be to give people who did not have access to employer-based death-in-service schemes access to similar benefits if they set up their own personal cover. The result was that the tax treatment for such schemes was the same both for employees and for the self-employed.
	The Secretary of State for Communities and Local Government, when she was Financial Secretary to the Treasury, told the House that A-day reforms would
	"create a transparent, consistent and flexible system that is readily understood. That will make it easier for people to concentrate on the things that matter, such as when and how much to save for their retirement, rather than on trying to understand anomalies between the different tax regimes."—[ Official Report, Standing Committee A, 8 June 2004; c. 427.]
	When the A-day reforms were being negotiated,the insurance industry made it very plain to the Government what the impact of those changes would be—that certain types of life cover would be given the same tax treatment as a pension. The Government were clearly told by the industry about the sort of products that would be developed in response to the legislation. From A-day onwards, a competitive market developed in what became known as pension term assurance,or PTA.
	Then suddenly, in December last year, after only9 months, the axe fell and the Chancellor announced that tax relief for PTA policies was to be scrapped.As the Association of British Insurers put it, the Government had managed
	"in one blow—to put an end to a developing market that they had only just helped create".
	Scottish Widows estimated that £35 million had been spent on developing PTA plans.
	We can see that the Government also found their reverse gear on clause 68, which introduces significant restrictions on the use of alternatively secured pensions—again, only nine months after their introduction on A-day. The Government have carried out U-turn after U-turn on pensions. These two latest examples come hard on the heels of their reverse on self-invested personal pensions—SIPPs—last year.

Theresa Villiers: What we want is for the Government to work out what they want to happen to pensions and to stick to that. We want them to get their pensions legislation right the first time, not to create legislation that generates whole industries, and then shut them down. Time and again, we see the Government producing legislation with a wholly predictable outcome about which they are warned in advance—yet when that outcome duly materialises, they decide that they do not like the consequence about which they were warned, and seek to amend the legislation and crack down on products that they themselves were effectively responsible for creating.
	This instability serves only to heighten the pensions crisis in this country. No wonder the savings ratio has halved in Britain since in 1997, when there is always a threat that the rug could be pulled from under people's feet at any moment if the Government decide thatthey have got their legislation wrong yet again. These repeated blows to Britain's savings come on top of the Chancellor's £100 billion raid on our pension funds. The right hon. Member for Birkenhead (Mr. Field) has pointed out that
	"when Labour came to office we had one of the strongest pension provisions in Europe and now probably we have some of the weakest".
	The Chancellor should accept his share of the blame for that disastrous decline.

Doug Henderson: I refer the House to my entry in the Register of Members' Interests.
	It is sometimes useful to remind ourselves why we have Finance Bills. They have two principal purposes, and one is to assess the state of the economy and make the necessary fiscal changes to ensure that we strike the proper balance between expenditure programmes and reasonably fair revenue raising systems. If we look back at Finance Bill debates of the past—I see at least one face opposite who used to take part in them with me—we see that the major focus has been on the macro-economic impact of the legislation. It was about whether the Finance Bill that followed on from the Budget was appropriate to regulate the state of the economy.
	The second purpose of a Finance Bill, today as always, is to look at the way in which fiscal rules—and sometimes expenditure rules relating to matters such as education—affect the economy. Do they achieve what they set out to achieve? Do they raise the necessary revenues that the system was introduced to raise in the first place? Is it a fair and efficient system? Has it kept up with the times? Those are both legitimate purposes for a Finance Bill, and those are legitimate arguments that should take place across the Floor of the House.
	I have read the Opposition's reasoned amendment—it is more of a rhetorical amendment—which comments on competing in the globalised economy. I hope that I am right in assuming that that relates to the first purpose of a Finance Bill, in that it deals with Britain's place in the world. The amendment goes on to mention a number of other issues, including whether small company taxation and the system that taxes freelance workers are appropriate. Is it better to be a freelance worker who sets up a company to manage the system or to have it managed by someone else? Should those people simply be self-employed? That is a legitimate argument, as is the question about the extent to which interventions or intrusions by the Revenue are proportionate. Those are all legitimate issues for debate on the Finance Bill, both in the House and in Committee, and our colleagues who will serve on the Public Bill Committee look forward to them. I may take part in the Committee of the whole House next week, but they may wish to look at the detail of those issues, and it is right that they shoulddo so.
	The problem with the Conservative amendment is that the first part does not relate to the second part. The way in which small companies are taxed, the tax regime for freelance workers and the degree to which the Revenue has powers of intrusion do not, in the real world, make a massive difference to the British economy. They make a difference to people who employ freelance workers and to people involved in a small company but, generally, but there is consensus among those who take an interest in those subjects that they do not make a big difference to Britain in the globalised economy, because they do not relate to the major issue of the level of expenditure and revenue in the economy. They do not relate largely to interest rate regimes in the economy or to Government expenditure programmes that equip the economy for future effectiveness and so on.
	That is the problem with the amendment. It would have been better if the Opposition were more honest, like the right hon. and learned Member for North-East Fife (Sir Menzies Campbell), the Liberal Democrat leader, who said in the Budget debate that the Chancellor had governed a successful economy. At least the Liberal Democrats conceded that there was a successful economy in Britain, so it would be legitimate for them to argue about whether those micro-fiscal regulations are appropriate. The Conservatives, however, have not conceded the point about Britain competing in the globalised economy, and I want to focus on that in my contribution. I am happy to look at other issues, but I am not prepared to concede that what we do on the tax regime for freelance workers will make a colossal difference to the state of the British economy and our ability to compete in a globalised world, which is the principal point made by the Conservative amendment.

John Redwood: The amendment is entitled to refer to all aspects of the Budget, but on its first point—competitiveness—what does the hon. Gentleman think about a whole dockyard in Britain being stripped out, sold and taken halfway round the world, and a whole car plant being folded up and sent halfway round the world to China? Is that a sign of success?

Doug Henderson: I am grateful to the hon. Lady for raising that point again. When I was a union official in the early 1980s, I used to negotiate 27 per cent. wage increases as my contribution to improving the stateof the British economy. She will know that the Conservative years in the 1990s had average annual inflation of more than 10 per cent., and between 1981 and 1991, that figure was worse.
	There is no scope for the hon. Lady to say that we might have won the growth argument, but that we can be challenged on the inflation argument. Inflation is a reasonable test of the direction of the economy, as it affects expectations, which are colossally important for investment. It is the right measure to consider, but I am not sure that the conclusions drawn are accurate.

Doug Henderson: I welcome my hon. Friend's point. In those days, it was not just the high level of interest rates that made planning future investment difficult, but the wild fluctuation in interest rates. A fluctuation of 15 or 20 per cent. on an annual interest rate of, say, 15 or17 per cent, has a lot more impact on the international competitiveness of a company than a 15 per cent. fluctuation on a 3 or 4 per cent. interest rate, as will be obvious to most Members.

Philip Dunne: I am gratefulto the hon. Gentleman for the history lesson in fluctuating interest rates. I think that the point he is trying to make is that expectation of interest rate movements has an influence on business investment. Does he agree that businesses currently have to operate in a very uncertain environment, with rising inflation and the expectation of rising interest rates? What will be the impact of that on business investment this year?

Doug Henderson: I am happy to have an interjection of monetarism into my historical examination. To go back to the 1990s—in the sense of saying, "You started it"—the fluctuations on high interest rates made conditions extremely difficult. I am not saying that we can accurately predict interest rates—indeed, I am still in a quandary about whether to buy dollars today or wait until Friday. I accept that there is an expectations issue, but there is much greater stability. The ability to predict generally the trend that is going to take greatly place affects those who make the major investment decisions. As I said to the hon. Member for Chipping Barnet (Mrs. Villiers), if we get the major investment decisions right, in general, the small investment decisions will be right as well.

Doug Henderson: The leader of the hon. Lady's party was helpful in the Budget debate in acknowledging the success of the British economy. I am grateful that she has acknowledged the correctness of the policy that was struck in 1997. If that was a policy that the Liberal Democrats agree with, it goes to show that it is not possible to get it wrong all the time. We all very much welcome that.
	There are many other indicators. My test is not growth, although that is important. The thing that affects human beings of working age more than anything else is whether they have a job. If one looks at the misery in families up and down the country over the years, which we have all come across, sometimes in our own families, we can see that things have been at a nadir when people have had the least opportunity of getting employment.
	The major gain in our economic performance made by the Government is the fact that employment is atan all-time high. Unemployment—not just this yearor last year, or this month or last month, but over10 years—is at a sustained low level. Unemployment in my constituency is way under half of what it was in 1997. That is the major achievement. That is what gives people hope, dignity and opportunity. That, to me, is the test of success in a global economy. If we do not compete successfully in a global economy, we do not compete on employment in the world in which we live.
	It is useful again to consider further why we have been able to achieve that. To some extent, it is about the business world and people in general having confidence in what is going to happen—in knowing that the economy is in good hands and that policieson tackling inflation, on having an independent determination of interest rates and on having high employment as a major political and economic goal are going to be consistent. Everybody knows that that is the case. People might not agree with some of the objectives, but they know what they are. It is that stability, given by the strong leadership of this Government, and in particular by the Chancellor,who has sustained it over 11 Budgets, that has got the economy in a position where it is competing successfully in the global world.

Brian Binley: Does the hon. Gentleman appreciate that we are in the middle of a cycle where UK plc is shedding about1.5 million jobs and the small and medium-sized business sector is creating about 2 million jobs? In the light of his comments about employment, what impact does he think the increase in corporation tax for small business will have on that scenario?

Doug Henderson: I come back to the point that I raised with the hon. Member for Chipping Barnet. I am not underplaying the importance of taxation regimes for the small business world, although they have to be fair. There must be equity between people who work for themselves and people who work for themselves with perhaps others in a company. That is an important principle of taxation. However, I do not believe that what we do in that regard ultimately affects our international competitiveness very much. What does affect our competitiveness is the ability of the economy to sustain a high level of aggregate demand, along with our ability to invest now to ensure that that continues in the future.
	I know that I have been speaking for rather a long time, and that many other hon. Members want to speak, but I want to say more about education and reskilling. I do not wish to underplay the hon. Gentleman's point, but sustained demand helps small businesses more than anything else. If someone wants to buy a product, there is an incentive for the producer to ensure that it is worth buying. Businesses mustlive with the various regulatory regimes—financial, environmental, or whatever they may be.
	Leadership and predictability are important. It is also important to understand that we live in a global world in economic and indeed in social terms. It is not a case of Bradford competing with Birmingham or Bordeaux; it must compete with every town in the world that begins with "B".

Doug Henderson: Beijing, yes. Bombay—well, that has changed to Mumbai.
	Small business people who are trying to sell engineering products or the like know who they must compete with. They know the market: they know what other businesses compete in it, and what those businesses are doing. There is now a recognition inthe British economy, driven to some extent, but not entirely, by the Government, that we operate in a global world. It does not matter whether we are talking about BAE Systems, employing thousands of people, or a small contractor, perhaps a freelancer, doing some computer work for it. That recognition is a major achievement. It may not have been achieved only by the Labour Government, but it has been achieved while there has been a Labour Government. It means that we must have a more flexible economy than we have ever had before, in all sorts of different ways. A flexible economy does not mean throwing away workers' rights, which should be secured, but the workers must be flexible in the way in which they do their jobs.
	How can we keep all this going? There is not much difference in the availability of capital around the world. Someone who has a good idea in the relatively stable political environment that much of the world can offer can usually obtain capital from somewhere to finance it. If it is necessary to develop or purchase technology, it does not matter where one is in the world, as long as people are prepared to provide money to be invested in technology. Where we can make a difference is in labour. The business environment factor is also important, but the labour factor is crucial, as I think all Members recognise.
	The test of the Budget is, does it help? Will the Government's policies generally, as reinforced by the Budget, and the specific policies in the Finance Bill help us to invest in a skills base in the future? The evidence suggests that it is possible. I am told that we expect to spend £90 billion on education in 2010. We are now spending 5.6 per cent. of our gross domestic product on education, compared with 4.7 per cent.in 1997. Our expenditure levels have increased dramatically, and we all know what that has enabled us to do in our constituencies. There are new schools in Westerhope and Gosforth and new equipment in virtually all the schools in my constituency, and that is replicated in most constituencies in the country. There has also been more spending per pupil. Earlier Budget decisions gave head teachers more control over the way in which expenditure could be used, and those welcome decisions have been reinforced in this year's Budget.
	We have doubled the number of apprenticeships, which provide an important way of improving how we adapt to the new technologies that we must use in our economy. The one-to-one tuition proposal, which is partly financed by the revenues raised in the Finance Bill, is one of the most radical measures taken in education policy—certainly by this Government, and arguably by any Government in my political lifetime. We all know that if a child attending a state school—and sometimes even a child at a private school—is suffering, a parent who has a couple of bob in their pocket can buy extra tuition. Many people have done that, but it has not been possible for those whose finances are tight—and they are tight for far more than 50 per cent. of families. The Government's proposal that anyone can get additional tuition in English and maths is fundamental to improving skills levels, which will help small businesses in five or 10 years' time—or 15 to 20 years' time—to get the skilled labour that they need and that we as a nation need if our economy is to be successful.
	I will not trade in education statistics—because, to be frank, I do not know much about that—but the aggregate figures that I have looked at show that we have better results at all levels in education, right through from primary school to university. That is a reflection of a greater commitment to society and of the investment of more resources. However, although there will be many long-term benefits in our economy, there is a problem to do with labour which we must address more effectively than we have thus far been able to address.
	In the past few years, the strange situation has occasionally arisen that at the same time that unemployment has increased—which it did in some months last year—so, too, has employment. That has never happened in any period of economic history that I have looked at, and certainly not during my political lifetime. There is a simple explanation for it: where companies have had a demand for labour, they have met that demand by bringing in people from somewhere else—such as Australia or eastern Europe. They have frequently got good skilled labour, but as they have been able to do that, some employers have not worked as hard as they might have done in the past, when it was not possible to do that, to improve the skill levels of our indigenous people—of those who have been in the country a lot longer. There is a certain amount of alienation among some of those people who have not experienced the benefits of increased prosperity and growth in the economy. We must look into that territory more carefully.
	I am vehemently in favour of the mobility of labour. I would hate it if a Government somewhere in the world were to tell me that I could not go and sell football programmes in their country—in Milan, or Africa, or wherever. As a human being, I like to live under a regime where people can do that. Therefore, I do not want any restrictions on immigration. There must sometimes be controls on the numbers over certain periods by using different methods—such as visas—but the principle should be that people are able to move around: people should be allowed to moveto where there is demand for labour. However, wemust also help people in our country—especially in constituencies such as mine—who often do not get any of the benefits that come from that.
	The Budget has recognised that issue in a number of ways, and it is therefore covered in our Finance Bill. The extension of the working tax credit threshold will help, as will the extension of the £40 work credit. Increasing the minimum wage, which is financed bythe Budget, is another helpful measure, and the partnership for jobs proposal points in the right direction. However, we must address the issue more seriously than we have in the past.
	I absolutely accept that the business climate is nowadays merely a factor of production. We must make sure that we get that climate right, if we are to achieve economic prosperity. The corporation tax proposals in clause 2 will overwhelmingly be welcomed by large and small companies alike. They will be welcomed by large companies because their tax burden will be reduced, and by small companies because that will create more growth in the economy. The provisions in clause 36 for extending capital allowances for small companies are also important. In past Finance Bills we have extended tax relief on research and development. That is done again in this Bill, and it needs to be done on a greater scale. Investment in public science is a crucial factor in improving our productivity in the future.

Philip Dunne: I do not wish to interrupt the hon. Gentleman's paeon of praise for the various measures in the Budget, but he mentioned the welcome thathe anticipates that they will receive from smaller companies. How many smaller company proprietors or managers in his constituency have actively welcomed the measures to increase the rate of corporation tax for smaller companies?

Doug Henderson: Before the hon. Gentleman intervenes again, he should know that I am not a born sycophant. Although I have a list, it does not include every measure. If one consults the bodies that represent small companies in my constituency, such as the chamber of commerce, one finds that they have allsaid that education is the priority and that we need to raise the revenues and have the right educational programmes to make us more efficient and productive in the future. They are right about that.
	Every small company that I know, and I know quite a few, is most concerned about whether someone wants to buy their product, not the hassle they have with Revenue and Customs. One always has hassle with Revenue and Customs, so that is not the issue. They are concerned whether anyone wants to buy their product or service and whether they can make that product or deliver the service in a way that will make people want to buy it tomorrow. That tends to be determined by attitudinal feelings in the economy and the level of aggregate demand.

Doug Henderson: I agree. When a product has many different inputs, the question is which bit we want to concentrate on, and that is a decision that companies often have to make. The machine tool industry is a classic example. Instead of trying to sell the whole machine—the whole Cincinnati, for example—onecan try to sell a specific high-value part of it as a contribution to others' productions systems. Decisions like that have to be made all the time, and my hon. Friend is right about that.

Brian Binley: The hon. Gentleman is being very generous. I just wondered how many service industry small businesses there are in his constituency, because there would appear to be none. More importantly,the hon. Gentleman seems to discount the impact of regulation, taxation and other problems faced by small businesses. Does he not recognise that in relative terms the impact is up to 30 times greater on small businesses than it is on UK plc companies?

Julia Goldsworthy: I thank the hon. Gentlemanfor giving way, because I am keen that he does not underestimate the importance of the contributionthat micro-businesses make to the economy. Micro-businesses are the largest employers in the county of Cornwall, which has one of the lowest GDPs in the country, so supporting the smallest enterprises in the small and medium-size range is critical to turning around the county's economy.

Doug Henderson: If I knew the answer to that, Iwould have solved an awful lot of problems in my constituency and elsewhere. Part of the answer is cultural.

Doug Henderson: As my hon. Friend says, part of the answer is skills, but another part is cultural. For example, firms in the software industry locate in the Thames valley because other software firms are there. People in the software industry know each other, they probably play tennis together and their kids go to the same schools. They create a community, so it is difficult for a small business in the software industry to locate anywhere else if it wants to be part of that cluster. That is an important factor.
	The key is to create clusters that are competitivein other parts of the country. Edinburgh is pretty competitive in the financial industry and there is a cluster there, although they all play golf and not tennis. There is a community of people who know each other and who can link up to help their firms to grow. In the north-east, there are cultural links between design companies in the engineering and oil industries. Companies that have been located in the area for many generations have upskilled themselves and exported their services around the world, and that is good forthe area.
	The trick in regional policy is to create more ofthose clusters. Teesside believes that firms in the pharmaceutical industry could become a cluster that would be of advantage to the area, and each area has to consider how it can build such opportunities.In Newcastle, we have high hopes that, based on biosciences, we can develop a cluster of embryonic industries that can then employ the graduates who go to universities in Newcastle. By the way, we play football in Newcastle, but creating such a cluster would help to address many of our economic problems.
	Development agencies in many parts of the country have to rethink how they approach these issues. I know that they have been thinking of how they can help to upgrade the skills that will give the regional economies a stronger base in the future.

Doug Henderson: The hon. Lady is right to raise that point, and I have no difficulty with it at all. The closer we can get to the activity, the better. I would support such a general move.
	Our educational institutions have a vital role to play in creating regional clusters of skills and industries around the country. We must bring them in more.Some are desperate to get in. Newcastle university, for example, is keen to get some of its wonderful scientific and technological breakthroughs translated into an applied state so that they can benefit the region.The regional development agencies ought to give universities more assistance in that respect.

Stewart Hosie: I am enjoying the hon. Gentleman's treatise on the commanding heights of the economy from a free market perspective. He mentions IT clusters and life science clusters. Dundee is very strong on both of those, particularly the latter, because of private money from the Wellcome Trust and £50 million from Wyeth. With reference to the Bill, does he agree that small companies in those sectors which are trying to grow will be affected by the new SME rules for research and development tax credits? He mentioned science education. Does he agree that the 0.9 per cent. of GDP which is to be maintained, and only maintained, for the next four or five years, and which is going into science education, is not good enough and that there mustbe a real-terms increase? In terms of the competitive advantage for the nations of the regions, why does he not consider full fiscal autonomy for Scotland and perhaps for Wales, so that we can lower corporation tax rates and really compete not just in the UK or in Europe, but in the world?

Julia Goldsworthy: The hon. Member for Newcastle upon Tyne, North (Mr. Henderson) raised some interesting questions about regional policy, which I agree needs to be re-examined. I represent a constituency that belongs to a region extending from the Isles to Scilly to Bristol and Swindon. Clearly, we need to re-assess what the regions, as currently defined, have in common. Thereis a great difference between the local economies of Penzance and of Bristol.
	The hon. Gentleman also raised some interesting issues about the purpose of the Finance Bill. He posed the question whether it should focus on macro or micro-economic issues. Perhaps the process that we go through each year in dealing with the Bill should be reviewed to try to encourage it to be more strategic.
	The last few sentences of the Chancellor's Budget included some pretty explosive fireworks, so initially I expected some pretty explosive stuff in this year's Finance Bill. However, it turns out that it is a bit more of a damp squib. Much of the Chancellor's wider legacy will be left to his successor to sort out—we have seen increases in unemployment recently, and we have rising interest rates, rising inflation and rising personal debt—and the same is true of the Finance Bill. The most uncomfortable bits for the Chancellor to justify and explain will be left to someone else to deal with next year. I am sure that the Paymaster General hopes that, after 11 Budgets of leading the Committee on the Finance Bill, it is not going to be her.
	The clearest example is the changes that were announced to income tax in the Budget. The changes cut the basic rate by 2p and abolish the 10p starting rate, which for 2 million people will in effect mean that the rate of tax that they will pay will increase by 10 per cent. The Chancellor said those last few sentences just before he sat down and in the immediate aftermath the proposals were broadly welcomed, even on the Liberal Democrat Benches. They seemed to mirror proposals made by the Liberal Democrat party to try to make the tax system fairer. As my hon. Friend the Member for Twickenham (Dr. Cable) said, initially it gave him a frisson of flattery, but, as ever the devil is in the detail.
	The Chancellor did not make it explicit in his Budget speech that the tax cut that he was trumpeting was going to be funded by raising taxes for those on the lowest incomes—mostly people who are lower paidand childless couples, who will pay more in tax. He is abolishing a rate of tax that he introduced. Perhaps that is why he is keen to leave the detailed debate to his successor. I would like the Minister to confirm that it would have been possible to include the income tax changes for next year in this year's Finance Bill, even though they may not take effect till next year. If it was decided not to do that, on what basis what that decision made? I hope to return to that when the Bill enters a Committee of the whole House.
	Other changes to the taxation system that were flagged up in the Budget have made their way into this year's Finance Bill. As we have already heard in some of the lengthy discussions about taxes on business,on the surface the changes look like simplification measures. They look like they should be welcomed, but once one looks in the Red Book and sees the way in which the revenue is changing, it is clear that there are complicating fingerprints from the Chancellor all over them. The changes were intended only to grab the headlines, not to make the system simpler or fairer.
	The headline cut in corporation tax from 30p to 28p in the pound is welcome in itself and follows the leadof many other leading economies, but it is going to be paid for by changes to capital allowances that will disproportionately hit some sectors over others. Small businesses will, in effect, see their corporation tax rate rise and they will still be trying to work out how they qualify under the changes to the other allowances that are proposed in the Finance Bill. As I have mentioned in interventions, micro-businesses will be the least well placed to try to navigate the new geography.
	I draw attention to clause 35 on industrial and agricultural buildings allowances. It seems that proper consideration has not been given to the kinds of businesses that will be adversely impacted. Two of the areas that have been highlighted are the hotel industry and poultry farmers. The clause withdraws after March 2007 the final allowance or charge that was previously taxable or tax deductible on disposal of these buildings. When implemented, the clause will change the impact of long-term investment decisions that might have been made many years ago. Hoteliers are concerned that that will increase room rents considerably. Hoteliers that have recently refurbished their hotels may find it difficult to raise room rates enough, compared with market rates.
	Turning to the agricultural buildings allowance, I would like to refer briefly to an issue raised by a constituent of my hon. Friend the Member for North Devon (Nick Harvey). The constituent referred to the abolition of the agricultural buildings allowance over four years and cited what he called something of a killer fact. He wrote:
	"Mr Brown describes in Budget Note no. 7...the reason for this abolition is that it removes 'outdated and unjustified distortions' implying that the ABA is some sort of tax break to encourage investment in the post war period. This is completely wrong. Poultry buildings"—
	this man is a poultry farmer—
	"in which I have a particular interest with my brother...will not last much longer than 25 years no matter how much you repair them, and so it would quite proper to write them off against tax over 25 years at 4 per cent."
	The point is that even some sub-sectors of particular sectors will be disproportionately disadvantaged. I am worried that the matter was not properly investigated before the announcement was made, because the measure was proposed to grab headlines. No strategic context undermines the long-term stability of the taxation system more than investor confidence. Was any assessment made of the differential impact of the measure on sub-sectors of the economy, such as the agricultural sector?

Julia Goldsworthy: I am sure that the right hon. Gentleman will know that it is the recommendation of the all-party group on climate change that we look again at banding issues. On our wider taxation policy, the Liberal Democrat tax commission will report in September—I am sure that he will watch for that with great interest—and we will respond to the changes made in this year's Budget in that report.
	The point that I was about to make is that the changes are welcome, but the concern is that the price changes will not have any impact on the behaviour of some people living in rural areas, because there are no public transport alternatives for them. That holds true for the vehicle excise duty rises, as well as for increases in fuel duty. We made proposals last year to try to flag up that issue, and considered a discount for the first vehicle registered by a household in isolated rural areas. I draw the Minister's attention to other options that the Treasury might consider that have been used in other areas where the issue has been recognised, and where people have sought to ameliorate it so that people for whom price will not make a difference do not suffer disproportionately.
	There is an EU derogation, which I understand is used in France, that assists isolated rural areas, and I understand that in Australia there are reliefs, as regards rural fuel stations, for drivers who are registered inan isolated rural area. That deals with the issue thatmy hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) raised last year; he said that in remote areas such as the highlands, fuel prices are much higher, just because of transport costs. There are alternatives elsewhere in the world that I hope the Minister will consider.
	The environmental proposals in the Budget get one cheer, rather than three, not least because, to turn to the issue of stamp duty land tax for zero-carbon homes, which has already been raised, there are many other things that could be done to help to try to improve the efficiency of the many thousands of houses that will be built in forthcoming years. That issue was raised in debate on the Local Planning Authorities (Energy and Energy Efficiency) Bill, a private Member's Bill introduced by a Labour Back Bencher, the hon. Member for Gower (Mr. Caton). The Bill sought to give more flexibility to local authorities to allow them to set higher environmental standards for new properties, but it was talked out by the Government, so there is an issue about the amount of cross-departmental co-operation that takes place to allow improvement to important environmental measures.
	Obviously, one of the key environmental measuresin this year's Budget and this year's Finance Bill arethe changes to air passenger duty. The changes were introduced without the House having the opportunity to debate or vote on them. We should combine that with the fact that many thousands of passengers had bought their tickets before the changes were introduced on 1 February; there are a lot of disgruntled people out there who see that kind of tax change as a means of raising money. It has done nothing but make people more cynical about any other tax proposals that the Government make to reduce emissions.
	I note that the Treasury Committee's report onthe pre-Budget report, in which the changes were announced, said:
	"As a general rule, we consider that, where increases in rates of duties or taxes are proposed in the Pre-Budget Report, those increases should not come into force until after the House of Commons has had an opportunity to come to a formal decision on the proposed increase following the Budget."
	The Treasury Committee went on to say:
	"We draw the attention of the House of Commons to the unusual timing of the implementation of the increases in Air Passenger Duty, for which the Treasury has not cited any relevant precedents."
	I invite the Minister to cite any relevant precedentson the Floor of the House today, and to explain whythe time scale that was used was adopted. That is important, because we are talking about credibility, public confidence about whether such measures are being taken for the right reasons, and ensuring an opportunity for debate.
	One of the other frustrations about the increases in air passenger duty is that they bear no relation to how busy the flight is, to the aeroplane's emissions or to its fuel-efficient. We must therefore question what impact they can have on changing behaviour.
	As an alternative, the Conservatives have suggested giving everybody an allowance for one long-distance flight a year, and possibly a limited number of short-haul flights, but that would create another database of everyone's movements and be impossible to monitor. Nevertheless, there are alternatives that the Government could and should investigate. Although they can be set out in more detail in Committee, it would be interesting to know at this stage whetherthe Government have considered applying to aviation similar principles to those that apply to vehicle excise duty, taking account of different sizes of planes, their differing emissions and their destinations. Such an approach would be useful in preparing for permit trading for aviation emissions—assuming that the Government are committed to that principle in the long term—because it would have to relate to howfull flights are, the efficiency of aeroplanes, and the distances they are travelling.

Rob Marris: The hon. Lady gets my brass neck of the day award. Three minutes ago, she suggested avery complicated vehicle excise duty scheme with exemptions for registered users in rural areas. She moved on, barely pausing for breath, to suggest a very complicated parallel aircraft vehicle excise duty, but possibly with exceptions for rural flights to the Islesof Scilly and so on. Now she has moved on to claim that the Government are responsible for all kinds of complicated tax measures that she decries the complications thereof. I congratulate her.

Julia Goldsworthy: I assume that the hon. Gentleman believes that the current banding of vehicle excise duty is too complicated and that he wouldlike it to be simplified, regardless of its negative environmental impact. If he takes that as understood,I do not understand why it cannot be read across.

Julia Goldsworthy: I want to try to make some progress, if the hon. Gentleman does not mind.
	The anti-avoidance provisions in last year's and this year's Finance Bill constitute a cat-and-mouse game whereby the Government try to close a loophole and another one opens that requires subsequent revisions in other Finance Bills. No sooner does one loophole close than another opens and the process starts again. It is endless. That adds weight to the argument that we should get rid of swathes of legislation and provide for a general anti-avoidance rule. Such a rule has already been successfully rolled out in Australia.
	When I consulted some professional bodies before the Second Reading debate, they said that they opposed a general anti-avoidance rule. I was interested in the reasons for their objection and I asked them to explain why they would be unhappy about such a rule. They said that they had no confidence that a general anti-avoidance rule would not be introduced on topof all the current anti-avoidance legislation. If the Government made a clear commitment to get rid of swathes of legislation and introduce a system that has been effective elsewhere, it would remove a few pages from "Tolley's Tax Guide" and help restore confidence.
	Clause 25, which deals with managed service companies, is a case in point. It attempts to deal with a genuine problem. The Government believe that many people avoid paying the right amount of income tax and national insurance by providing their services through a managed service company and being paid through dividends rather than a salary. As a result of the changes for which the Bill provides, managed service companies will, among other things, have to operate PAYE, deducting income tax and national insurance contributions on all payments, regardless of whether the individual receives a salary or dividend.
	We accept that abuse is occurring and needs to be tackled, but I should like to flag up some of the implications of clause 25. First, do the changes deal with the underlying problem of why people choose to operate through managed service companies? There is no balance between the taxation systems for the employed and the self-employed. Instead of directly dealing with that, the Government are basically saying that anyone who operates through a managed service company will continue to bear the risk of being self-employed but enjoy none of the benefits. That problem has not been resolved.
	The other problem is that even flagging up issues and stating an intention to legislate has again encouraged behavioural changes with which HMRC will struggle. In response to consultation, the Institute of Chartered Accountants said that it had seen correspondence from managed service companies to their customers that already offers an alternative service. It involves setting up each individual in a personal service company, of which the individual is the sole shareholder or director. Customers are then asked to self-certify whether they are within the rules of IR35. Many of those individuals cannot realistically know that.
	The Institute of Chartered Accountants continues:
	"We have had confirmation from Companies House that there were 56,218 new companies registered in February 2007, while a more usual monthly figure would be approximately 28,000."
	The figure has therefore nearly doubled. The institute goes on:
	"In one week alone, there were 20,000 new companies registered. Our initial conclusion is that the proposed new rules may not work and may cause more problems than they solve."
	That will ultimately cause more problems for HMRC, which is cutting front-line staff at a point when there could be a massive explosion in the number of individuals who register themselves as personal service companies and therefore need closer attention from local HMRC officers. How will HMRC manage the additional burden of ensuring that all the PSCsare compliant? We are seeing more legislation with unintended consequences, which could ultimately occupy all HMRC resources.
	Equally frustrating is the way in which the consultation was undertaken. In many cases, as confirmed by my experience of last year's Finance Bill, proposals are rushed through in order to fit in withthe annual Finance Bill timetable without due consideration being given to professional opinions and concerns. The classic example last year was the inheritance tax treatment of trusts, which was launched on an unsuspecting industry and public without any consultation and then went through several iterations in Committee with significant changes being made to both the clauses and the schedules. Although we do not have anything on that scale this year, there are signs of a similar approach.
	I have already talked about air passenger duty and how it was introduced. My point also applies to clauses intended to expand the powers of HMRC in clauses 81 to 86. Even though there was a consultation process in January, in which concerns were raised about taking on arrest powers, the Treasury response was to concede that there was a need for guidance, but to state:
	"This will be published as soon as possible and before any changes come into force."
	My understanding is that the guidance has not yet been published. Will we see it before next week when these issues are debated on the Floor of the House? It would certainly help to inform our debate. If it is not going to be available, I find it very worrying. I hope that the Minister will be able to confirm that the guidance will be available before next week.
	Concerns have also been raised about clarity and about how widely drafted the provisions are. Once again, the issue has been dismissed and we are told that the clarification will come through guidance. It is a cavalier approach. Ultimately, any legal action taken in future will be based on the law as it stands, not on the guidance, which can be subject to change without consultation or even without any reference to Parliament. Those concerns are depressingly familiar, as we have seen them in relation to previous Finance Bills. Key questions about process are raised. Surely the position could be improved by better pre-legislative consultation and scrutiny, so that we could have an open and public debate with professional bodies about the strategic approach of our tax system.
	It might also help if we had a full Finance Bill only once every two years, perhaps with a beefed-up Budget resolution in between. In that way, we could get back to the strategic perspective of what the tax system is supposed to achieve. It would then no longer be a vehicle just for tinkering on a minute level.

Dawn Primarolo: The point I was making to thehon. Lady was that there is a difference between policy and technical amendment. She previously complained about anti-avoidance policy being too long, so will she explain how that matter could be dealt with just through Budget resolutions without discussion by the House?

Julia Goldsworthy: Let me offer an alternative that the right hon. Lady might find more palatable. If Treasury Ministers are not prepared to adopt such a radical approach, I suggest that the Finance Bill be included in an approach to legislation for whichthere is already a precedent. I sat on the Committee considering the Statistics and Registration Service Bill earlier this year. It was one of the first Bills in respect of which we had the option of taking evidence in public before the Committee stage. I understand that the enabling primary legislation specifically excluded the Finance Bill, but in my opinion the Finance Bill would be one of the best possible candidates for inclusion in the process. There are some very technical issues, but the experts dealing with them end up being mediated through hon. Members on both sides of the House. If we had the opportunity for proper pre-legislative scrutiny and for expert bodies to be able to provide evidence on the record, I believe that it would significantly facilitate the process. I hope that the Paymaster General will give serious considerationto that.

Rob Marris: On the hon. Lady's first point, I cannot answer for the Minister. The Minister is answerable for the policy of the Government. On vehicle excise duty, the hon. Lady was not listening to me, as is sadly all too often the case. Perhaps it is my own fault for not being clear enough. I merely made some points and asked her a question in an intervention. In my opening remarks, I responded to the points that she had raised, as she would not let me intervene further on her. I have not decried complications in the Finance Bill, although she seems to assume that I have, and that there is therefore a contradiction in my position. Such a contradiction exists in her position, however, given that she decries complications and then suggests that we should introduce them. I entirely agree with her that it would involve complication to introduce a band of £2,000 for the most polluting new vehicles—I stress that it would apply only to new vehicles; there would be no retrospection—nine out of 10 of which are not 4x4s, by the way. But, unlike the hon. Lady, I have not, sofar as I can recall, stood before the House, beforeany Finance Bill Committee or before any other body decrying complications in the Finance Bill. So although there is a contradiction in her position, I see no such contradiction in mine.

Rob Marris: The hon. Gentleman is quite right.That may say something about the quality of the contribution by their Front-Bench spokesperson, or they may all be off somewhere trying to put policy together—I know not which.
	I shall move on to the main part of my speech, which refers to the reasoned amendment moved by the hon. Member for Chipping Barnet (Mrs. Villiers) on behalf of her right hon. and hon. Friends. I wish to address two aspects of the amendment; the first relates to the so-called pensions crisis, and the second to tackling climate change. On the first point, we need to put the situation in three contexts: the experience of current pensioners; the experience of prospective pensioners; and, given the recent history of this country, the experience of those two groups combined. That covers, for example, someone who was a prospective pensioner in 1997, has since reached retirement age and is now drawing their pension. It is to those three groups—current, prospective, and current and prospective together looking at the history—to which I now turn.
	First, on current pensioners and the so-called pensions crisis, the hon. Member for Chipping Barnet used the hackneyed phrase about our having the weakest pension system in Europe. That shows a certain ignorance about other European countries with pension schemes. I do not claim to be an expert, but if she genuinely thinks that the pension system in the United Kingdom, both public and private, is, for example, anywhere near the systems in Albania, Bulgaria, Romania or some other European countries, I suspect that she is wrong.

Rob Marris: If someone is quoting people approvingly, it is better to know the substance to which the quote relates, and whether they agree with it or are just mouthing the words, which may make a glib soundbite but which are, I think, inaccurate.
	Secondly, on the position of people who are pensioners in the United Kingdom, we need to lookat how far we have come in the last 10 years. That is often overlooked by Her Majesty's Opposition, for understandable reasons, because they had a terrible record in that regard. In 1997, when the Government came to office, a single pensioner was expected by the state to live on £69 a week. There has been some inflation in the intervening 10 years, but that figure is now roughly £120 a week. To make the comparison clear to the House, a pensioner then could have received council tax and housing benefit on top of the £69—but that is also true for the sum of about £120 a week.

John Redwood: Most pensioners do not think thata load more administrators and a very expensive computerisation programme represents an increasein their welfare. To return to the comparison, the Conservative Government did not expect pensioners to live on the sums to which the hon. Gentleman referred. We assumed that they would either have a good private pension top-up, because we did not tax it and wreck it, or that they would receive means-tested benefits, as is the case under this Government. The big change that we made was to link the standard pension to prices,not earnings, which obviously made an impact. This Government have done exactly the same for the past 10 years, and will continue to do so for the next five years, if they stay in power.

Rob Marris: My hon. Friend is absolutely right. Isay rhetorically—I stress the adverb "rhetorically", because I do not want any misunderstanding—that the Conservative Government did not want people going out to the local hospital, because every year there was a winter crisis, such as we have not had for several years, and they did not want them going out and voting Labour, either, so they told them to stay at home.

Rob Marris: My hon. Friend is absolutely right. Contrary to the perceptions of some individuals, the Government's support for pensioners over the past10 years has consisted of a mixture of means-tested benefits such as pension credit, and non-means-tested benefits such as winter fuel allowances and free television licences for the over-75s, which I hope will be provided for the over-65s. We also restored free eye tests—another non-means-tested benefit. To focus help on the poorest pensioners, which the Government have tried to do, we must—surprise, surprise—have some means of determining who the poorest pensioners are.

Rob Marris: I would not want the hon. Gentleman, or the House, to think that I am suggesting that everything is rosy for pensioners. I am trying to draw a contrast between the situation for pensioners today and that in 1997. Pensioner inflation has been higher, and one hopes that that will lessen markedly, with gas prices coming down by 16 per cent. Sadly, the energy companies are occasionally a little slow to feed those decreases through to domestic customers. I am not saying that all problems are solved for pensioners, or that pensioners are living in a land of milk and honey. Many pensioners in my constituency, however, have said to me that life now for pensioners is not nearly as bad, bleak and grim as it was when they had to sit at home in one room, in a woolly hat, with a one-bar half-kilowatt electric fire on for half the day. Far too many pensioners found themselves in that situation in 1997. The situation for pensioners has improved. In that context it is not right to talk about a pensions crisis—and it is bit rich coming from the official Opposition.
	The situation of the category of pensioner that I delineated—those who were prospective pensioners in 1996, but who are now pensioners—is undoubtedly grim. Pension schemes have gone bust at the British Shoe Corporation, Allied Steel and Wire in south Wales and Chart Heat Exchangers, at which establishment some of my constituents worked, in the constituency of my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) who is in his place.
	The situation of pension schemes in the private sector today, however, was not simply caused by the Chancellor's tax changes in 1997, as some—but, to their credit, not all—Opposition Members would seek to suggest. I agree that those tax changes, taken by themselves, had an adverse effect on private pension funds—[Hon. Members: "Ah."] I hear "Ahs " from the Conservative Benches, but I do not hear them from the Liberal Benches, because there is only the hon. Member for Falmouth and Camborne sitting there. There was a change to corporation tax at the same time, however, which more than made up for other changes in the tax regime, such as those in advance corporation tax.
	Another factor in the difficulties in which private pension funds found themselves from 1997 onwards was the dotcom bubble. Some of them thought that it was like the South Sea bubble, but they did not realise that it was a bubble. Whether one looks at Kondratiev waves or other cycles in the economy, things go up and down, and the stock market vastly overvalued dotcom companies.

Rob Marris: My hon. Friend is right. There are strong links between his constituency and mine, forged not least by Stan Cullis—I have an office in Stan Cullis House. Pension schemes were getting into difficulty before 1997, most notably in the Maxwell case, when the remedies put forward were not the same.
	As for the reasons for pension funds' difficulties, one of the legacies that built up to 1997 and onwards was that of underfunding, and contribution holidays taken by greedy employers. The extent of that underfunding started to emerge only when the Labour Government insisted on FRS 17, to try to get pension funds to indicate whether they were solvent. Some of them had been hiding the situation for years. It was like pyramid sales: they had been taking contribution holidays, building up deficits in the scheme and not telling anyone about them. We often hear about such cases in this place. I understand the ebb and flow of politics. When a Government change a regime so that there is greater transparency, they can catch a political coldfor disclosing something that has been building upfor years.
	Parenthetically, I say that we had the same difficulty with methicillin-resistant Staphylococcus aureus in hospitals, about which the Conservative Government did almost nothing for 18 years. They would not publish the figures, but we did. That transparency meant that our constituents became aware of the widespread difficulty with MRSA in some health institutions. We got clobbered for something that had been allowed to build up, almost totally unaddressed, under the previous Government.

Rob Marris: As a non-practising solicitor, I can tell my hon. Friend that it does work with lawyers, because I get contacted by the Law Society.
	Last Tuesday I again made the remarks, which I shall repeat, about my views about the responsibility ofthe actuarial profession—not every actuary—for the difficulties in which some private sector pension schemes have found themselves. I made those remarks on two occasions many months ago, and I have never been contacted by even one actuary suggesting that I was wrong.
	As many right hon. and hon. Members will know, I was on the panel of the Law Society of England and Wales as a personal injury specialist from its inception in, I think, 1991. That is roughly equivalent of beinga hospital consultant. It is a recognition of one's professional expertise in a particular area of legal endeavour and practice. As a personal injury lawyer, I would calculate lifetime losses. If someone has a fairly catastrophic injury and suffers a loss that will continue for the rest of their natural life, one cannot calculatein most cases—although sadly, in some cases one can—what their individual life expectancy will be. For the purposes of the calculation, one notes their age and gender and takes it from there.
	I used to get new life tables every year or two and would adjust my calculations. Rising life expectancy meant that in calculating a lifetime loss for any client, it would have been negligent of me, as a solicitor, notto take into account the fact that statistically, that individual was now expected to live longer than had been the statistical expectation perhaps two years previously for someone of the same gender and age. I would adjust the calculations that I would otherwise have made under old life tables and make them under the new life tables to reflect the longer life expectancy.
	I was not the only solicitor doing that, I hasten to add. It was standard throughout the profession. We were taking into account rising life expectancies in our professional practice. It appears that far too many actuaries were ignoring rising life expectancy when doing their calculations and advising pension schemes on how much funding a scheme should have—for example, how much the employer should contribute or whether that employer should continue their pension contribution holiday. Although that was not the only driver, it was one of the major drivers, and probably the biggest single driver, of the pensions difficulties that have been disclosed in the past 10 years. They have been disclosed because of FSR 17 and pension organisations having to come clean about how much, or how little, they have in the kitty.
	The reasoned amendment refers to a pensions crisis. There is a crisis for many people, and that is appalling, but another driver, which will feed through to those who have not yet started to receive their pension, is the change from final salary schemes to money purchase schemes—from what are sometimes called defined benefit schemes to defined contribution schemes. I am not a defender of final salary schemes in the private sector. They are a historic dead end. They cannotbe underwritten by, say, a trading company, becausewe all know that companies that trade, such asH. H. Robertson or Chart Heat Exchangers, go bust and cannot top up the scheme.
	Our constituents are understandably saying, "I'm going to get a worse pension than I thought I would because the company's changed the scheme," and in almost every case of which I am aware—I am aware of quite a lot, because I was on the Select Committee on Work and Pensions throughout the last Parliament—employers who are changing from a final salaryscheme to a money purchase scheme are cutting their contributions as a percentage of payroll. It is not simply a technical move, with them deciding to restructure the scheme in a different way to give greater security—although that is how they may try to sell the change to their employees. They are markedly cutting contributions.
	Quite a big private sector employer in my constituency commendably puts in to a final salary scheme that is now closed about 26 per cent. of payroll every year—I think my figures are right; I am doing them from memory, but they are something of that order. The employee contributions are 7 or 8 per cent. for those who are in the scheme, which closed to new entrants about five years ago. Under the new scheme, the employer's contributions are markedly lower. I cannot remember them precisely, but I think that they are in the order of 7 or 8 per cent.
	I understand why the company has made that change. It is trying to remain competitive with other companies, and some bright spark came up with that idea in some part of the country, and it snowballed from there. However, the demise of final salary schemes, which continue to exist in as much as they are not insolvent, has been driven not by changes made by the Government, but by employers trying to lowerthe pension contributions that they make on behalfof staff—effectively, to cut their wage bills. Thereare many things for which one can try to blame a Government, but one cannot blame any Government, of whatever political party, for employers effectively cutting the wages of their employees. I do not think that they should do that, but that is what has been happening.
	As for the third category of prospective pensioners—in particular, those who were in a scheme that is now insolvent—the official Opposition appear to think that the Government should be the insurer of last resort for every private pension scheme. I disagree. I have made it clear to the Government many times that they have a responsibility—as did the previous Conservative Government—for allowing misleading leaflets to be put out to prospective members of schemes and members of private company occupational pension schemes on how secure those might be.
	Others also bear responsibility in that regard. Those who were advising individuals on pension schemes—independent financial advisers and so on—should have known better, as should, dare I say it, trade unions on some occasions. I say that as a proud member of the Transport and General Workers Union. There was a somewhat cavalier attitude across the board, with individuals who were involved in giving advice to employees not stopping and thinking enough about how secure—or, as it sadly turns out in all too many cases—insecure private occupational pension schemes were.
	The Government, reacting to pressure from Ministers as constituency MPs and Members on both sides of the House, have done a pretty good job with an 80 per cent. guarantee and a commitment last week from the Secretary of State for Work and Pensions to see whether that could be higher, although we do not have the costs of that. Through the budgetary mechanisms of the Treasury, the Government are putting forward £8 billion in future value, not in net current value, for the financial assistance scheme. They are also acting to try to stop the shenanigans of companies playing fast and loose with their pension schemes. We all know that that was going on in the 1990s: we know that the amount of money in a pension scheme fund predicated whether there would be a takeover. The Pension Protection Fund, which I believe came into force in April 2005, was introduced by this Government to prevent a repetition of the scandalous behaviour that had been so devastating for pension scheme members.

Ken Purchase: My hon. Friend mentioned Government leaflets and advice. Does he accept that any Government must depend on the honesty and integrity of the managers of pension funds, and that therehas been dishonesty in the case of a considerable number of pension failures? My hon. Friend referred to FRS 17, which opened a Pandora's box, but any Government must give advice on the basis that people will be honest and obey the law. Surely the system has collapsed not because of bad advice, but simply because some employers have been blatantly dishonest in the management of pension funds.

Rob Marris: I agree with my hon. Friend and neighbour. To put it succinctly, there were some rip-off merchants around. This Government introduced schemes such as the financial assistance scheme to help those who suffered as a result of past rip-offs, the aim being to clamp down on past rip-offs and any prospective future rip-offs; and if any more rip-offs do occur, the Pension Protection Fund is there to prevent more people from suffering. There were bad people around, and, as my hon. Friend says, there is only so much that a Government can do to deal with that. Sometimes they have to act after the horse as bolted, as with the financial assistance scheme or the Pension Protection Fund.
	I am sure that the Paymaster General has the figures at her fingertips and will correct me if I am wrongbut, according to my recollection, in recent years, during the so-called pensions crisis referred to in the amendment, the amount in pension funds has moreor less doubled. It is up to about £790 billion. The Opposition may speak of a pensions crisis, but although there are problems with pensions and people's lives have been devastated—I do not want my position to be misunderstood in that regard—it does not strike me as very illuminating to use the term "pensions crisis" in a general sense when the amount of money in pension funds has doubled. I repeat that I do not underestimate the devastation of people's lives, but I would not describe it as a general crisis, as the amendment seems to. Of course it is a crisis for some individuals—about 125,000—and it must be absolutely awful for them.

Rob Marris: It could be disastrous. Any subsequent Government might not have enough money to meet the commitment that this Government had made—in so far as any Government can bind their successors—of a considerable amount of taxpayers' money for the future.
	As my hon. Friend will know, some Members have suggested what is sometimes described as a lifeboat scheme. Indeed, I hear rumours that there may bean amendment to the Pensions Bill to that effect. Interestingly, the lifeboat scheme has been decried by the Association of British Insurers, which regards it as being akin to ripping off other people's money, so I am not sure that it would be a very good idea.

Stewart Hosie: The hon. Gentleman raised the question of pensions on the basis of the Conservatives' amendment, which refers to a pensions crisis. He mentioned the FAS and the £8 billion, which of course is welcome, but does he understand the frustration felt by people who, although their schemes are eligible, are still not receiving money because the full schemes have not been wound up? That may happen even in the case of even a small scheme if a single ex-member cannot be identified. Does he share our frustration? We may welcome the extra money for the FAS, but it is not yet quite delivering for all the people for whom it should be delivering.

Rob Marris: I think that there is frustration throughout the House about the fact that, although the Government have committed a considerable amountto assist the 125,000 pensioners, only about 1,500have received any money. Surprise, surprise, some accountants who are acting as receivers for insolvent schemes appear not to have been exactly speedy in dealing with the paperwork to enable members of those schemes to obtain money from the FAS. If I am going to slag off professions, I might as well go for bust, although there are exceptions such as my hon. Friend the Member for Stoke-on-Trent, South (Mr. Flello)
	Chart Heat Exchangers is a prime example. It is based in the constituency of my hon. Friend the Member for Wolverhampton, North-East, but three of my constituents have notified me of their interest. It is all very sad. From correspondence that I have received, and I suspect from correspondence that he has received, as I understand he has led on the issue in Wolverhampton, it seems that PricewaterhouseCoopers has not been very speedy.
	According to my understanding of the way in which these things work—perhaps PricewaterhouseCoopers will write to me tomorrow and tell me that I am wrong—the company is being paid but the pensioners are not being paid, and some are indigent for that reason. One suspects that not many people who work for PricewaterhouseCoopers or similar organisations are exactly indigent, so it appears that the cash is in the wrong place.
	The hon. Member for Dundee, East (Stewart Hosie) is right: the slowness of the system has been extremely frustrating. However, I see cogs turning in his brain, for he is a smart man. Could we have made the system work more quickly? I am not sure that we could. As he said, there are technical difficulties with tracing people and getting the trustees to act. If there had been an immediate payout, we would have risked a situation like the one that we have experienced, to a small extent, with tax credits—overpayments, and people havingto pay some of the money back. We have carefully avoided that in the case of the disastrous rural payments scheme.
	Members will be relieved to learn that that concludes my brief remarks about pensions. I now want to speak about climate change, as I warned the House that I would at the beginning of my speech. Those who know me, and Members who take an interest in Finance Bills and associated matters, will be aware that climate change is a particular concern of mine.
	Both the hon. Member for Chipping Barnet and the hon. Member for Falmouth and Camborne properly highlighted green issues such as climate change in their speeches, and the amendment refers to tackling climate change, but yet again we have heard about only one side of the equation. Of course cutting emissions is important, but we do not hear about the other side of the equation—adaptation. The right hon. Member for Wokingham (Mr. Redwood) nods. He and I have had conversations about the issue; I know that he takes an interest in it, and I know that the Government do as well. This is the third or fourth time that I have spoken about this in the last 12 months, and I am about to do so again at some length, and I urge the House once more to start talking about both sides of the equation. We must talk about adaptation to climate change as well as emissions. We must talk about dealing with the effects as well as the causes.
	The point that I always make, and will continue to make until Opposition Front Benchers understand it a little better—I believe that my Front Benchers have understood it, and I will explain why in a moment—is that we are dealing with the half of the equation thatis broadly beyond our control, because the United Kingdom is responsible for roughly 2 per cent. of world emissions. It is important for us to show global leadership. We emit roughly twice the world average because we are a rich country, and it is important for us to reduce our emissions, but we persist in talking about the half of the equation that is 98 per cent. beyond our control unless we can secure international agreements that can then be enforced—Kyoto, for example, hasnot been enforced because there is no enforcement mechanism—while not talking about the half that is wholly within our control: effects. We should of course talk about the half that is not within our control, but not at the expense of talking about the half that is.

Rob Marris: I understand the hon. Lady's point and will come on to how what I am talking about intersects with the Budget. I am mentioning it because it is raised in the amendment of the right hon. Member for Witney (Mr. Cameron). On flood defence budgets,the hon. Lady really must do her homework. The Government cut flood defences by about £15 million in the last financial year, but they have increasedthat budget this year. The cut was not of a sum such as £200 million; the hon. Lady has a rural constituency,so she ought to know that. In my constituency in Wolverhampton, flood defences are not a big issue. They are a big national issue, and I agree that they are important but, as the hon. Member for Northampton, South (Mr. Binley) is aware as he knows the area well, flood defences are not a big issue there. The flooding of Smestow brook in my constituency is not a big deal. The hon. Member for Falmouth and Camborne might know that Wolverhampton does not have any coastline, so there is no coastal defences issue. We are quite high up: about 120 m above sea level. It is said that our arch rivals at football, West Bromwich Albion, have the highest league football ground in England, which is about 135 m above sea level and we are about the same height above sea level. Let me say again that flooding is an important issue, and that the Government have rightly reversed the budget cut mentioned.
	Let me now turn to what the Environment Agency says about the difficulties that we face. I will, Mr. Deputy Speaker, link this point not only with the amendment but with the contents of the Finance Bill, and with the measures that I would have preferred to have been included in the Finance Bill. The difficulties that we face—

Rob Marris: I am grateful to you for that guidance, Mr. Deputy Speaker.
	Climate change is already happening in the United Kingdom. The Government are taking steps to adapt, such as by enabling us to build things such as flood defences, but we are not doing enough in that regard, and the Finance Bill represents a missed opportunity. Let me set out the sorts of steps that we should be taking, and for which there should have been tax reliefs in the Budget—to refer to the point of the hon. Member for Falmouth and Camborne as to how the Budget as a revenue-raising measure intersects with this issue. We should have more tax reliefs than those that currently exist in our financial regime, and those that the Finance Bill introduces should be stronger. We should also have had some new tax reliefs.
	There should be tax reliefs for adaptation measures.I broadly agree with a point made by the right hon. Member for Wokingham, when he told me to look at what his Conservative Government did when they were faced with a campaign for lead-free air. A tax regime was introduced whereby there was a tax discount—not a tax relief—for unleaded petrol. When it was introduced, some people found that their car neededno adaptation whatsoever. I was putting in unleaded petrol before there was a tax break and, at one point in 1985, there were only two petrol stations in the entire city of Wolverhampton that offered unleaded petrol. I was driving a Volkswagen, which did not need any adaptation at all. However, other cars, on slightly different technology, needed adaptation, which at that time cost about £30, if I remember correctly. A tax differential of lower excise duty for unleaded petrol than for leaded petrol massively boosted what had been a tiny market almost overnight. It happened very quickly—within a year, I estimate. There was at that point no legislation banning leaded petrol; perhaps there should have been, but there was not. The shift was driven by the market, which was driven by fiscal changes. In the Finance Bill, there should have been more such general measures to do with adaptation for dealing with the effects of climate change.
	I would like boosted research and development tax credits. They have already been boosted a lot by the Government, and there are also some changes to them in the Finance Bill. I understand that what I say on this is open to a charge of complexity, but we will need boosted R and D for endeavours such as research into the medicines that we will need to deal with the new diseases that we will get in this country, such as malaria. It will not just be cases of malaria in people who have been on holiday: we will also have malaria in southern England because of climate change as rising temperatures mean that malarial mosquitoes will come into our country. Research must be done on that.
	We also need research on the kind of crops that we will be able to grow in this country. We will not simply be able to transplant a crop that has grown in amore southerly latitude, because the configuration of daylight hours is different the further north we go. In some places, there are longer summers and shorter winters, so we cannot always simply transplant a crop from Algeria or Malaga, for instance, up to Margate or Manchester to replace those that might no longer be viable because of shortages of water and higher temperatures. There must be a research and development push on that. Steps are being taken, but we need to encourage that further with fiscal measures that I would have liked to have been included in the Finance Bill.
	There is a similar point to be made on biodiversity, and The Wildlife Trusts is doing a great job in driving that. It produced a document on,
	"Adaptation to climate change. Sustainable local economies. Abundant wildlife. Healthy cities and green space for all".
	The document was produced last year, and I went to TWT's excellent reception in the Members' Dining Room. Many other groups are also taking such steps, but they need some fiscal encouragement.
	The VAT regime has been referred to indirectly, and perhaps ironically, from the other side of the equation by my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller). There has been some levity on Opposition Benches regarding changes in measures such as stamp duty land tax for low-carbon homes; Opposition Members chuckle to themselves about how many low-carbon homes there might be.
	There is a fiscal measure in the Finance Bill to do with tackling climate change, which the reasoned amendment decries the Government for not doing. It is a measure to make a market and drive a market. In and of itself, it will not make or drive a market, and it is not equivalent to the situation with regard to unleaded petrol, but it is similar: it is a fiscal measure to try to kick-start a market.

Rob Marris: I entirely agree. The right hon. Gentleman foreshadows remarks that I was about to make on building adapted homes—zero-carbon homes, for which there are fiscal incentives in the Finance Bill. However, I am not aware that there are any fiscal incentives—in this Bill, or previously—to deal with matters such as those that he refers to.
	The drainpipes on older homes will need to be changed. In many parts of the country, people will need bigger drainpipes because of the increased incidence of sudden deluges. All Members will remember what happened in Boscastle in 2004, when8 in of rain fell in a very short period. Lest any Member wishes to treat this matter with levity, let me say that I am not saying that bigger drainpipes would have prevented the disaster in Boscastle, but it is a graphic example of why we need adaptation to deal with heavy torrential downpours the like of which we have not hitherto experienced in the United Kingdom on a frequent basis. On present indications, they will become more frequent in winter. I am not aware of there being any fiscal incentives in this Finance Bill to address that.
	I am not aware of any incentives for adapting the heating and ventilation of homes that already exist, in contradistinction to the low-carbon tax break for new homes. That is a health issue as well as a comfort issue, because a lot of people will die. It is estimated that 20,000 older people died across Europe in 2003, including in the United Kingdom but principally in France, as there was very hot weather in July and August. Homes will need to be adapted. There will need to be fiscal incentives, particularly through VAT—by lowering the VAT rate and, perhaps, going to the European Commission and saying, "All 27 countries face this, and we need to have powers to derogate in lowering the VAT rate for building adaptations to existing buildings."
	Similar points apply to land drainage and other issues. We need tax breaks with very strict compliance mechanisms for the water companies to get them to build more reservoirs. We will need more reservoirs. On all current projections, there will be an increase in drought in the UK, particularly in southern England but also in East Anglia, which most of us wouldnot consider part of southern England, and further north——even, on current indications, in parts of lowland Scotland.

Robert Flello: Does my hon. Friend agree that weneed a fundamental review of our infrastructure in many areas? For example, a heavy downpour is lost immediately through the storm drains.

Rob Marris: That is certainly the case. I heard a claim the other day—I do not know whether it is true, but it is the typical sort of figure that one hears in the House—that we have less rain per capita than Sudan. We do not have much rain in this country, especiallyin England and, in particular, in East Anglia. Geographers count large parts of East Anglia as a desert, in terms of annual rainfall. We have to use that rain carefully.
	We already do a good job in recycling water. People were shocked in Australia recently by a proposal to use grey water, but we found it extraordinary that that should be so new to them. To make the best use ofsuch approaches, we need not only the regulatory and planning regimes, but some fiscal incentives. The Government are actively pursuing a policy of adaptation to climate change, but they should do more, including fiscal incentives.
	If I may be allowed a personal advertisement, I proposed a private Member's Bill on climate change adaptation, which was the first climate changeBill in this Parliament. It would have required the Government to report annually to Parliament on what had been done to adapt for climate change. I am pleased to say that, broadly, that has been incorporated in clause 37 of the Climate Change (Effects) Bill. However, annual reporting of adaptation is not by itself enough. It is part of greater transparency, but we need to make progress.
	Some great work is being done by the Oxford-based UK Climate Impacts Programme, which gets a paltry £800,000 a year from the Government. I have visited the programme, been to its conference and talked to the staff, and it does great work, but we need to produce the big changes in behaviour and adaptation before it is too late. As the right hon. Member for Wokingham said, 7 million people will be at risk of flooding in London, although those who built the Thames barrier were far-sighted and it is being used much more frequently now. As I understand it, a new Thames barrier will be needed, although I am not an experton London and the south-east, because I am a west midlands MP. I pick up such information because it is the capital of our country and we cannot let it drown, even though—or perhaps because—that would make Birmingham the capital of England. Seriously speaking, we cannot let London drown, so we need to push forward adaptation measures.
	As we saw with the change to unleaded petrol, measures in the Finance Bill have a big role to play in change. They could have a big role to play in emissions and their causes, and mention has been made of vehicle excise duty, although the Bill does not go far enough. Such measures as are included are very welcome, but we need more to encourage adaptation to climate change, because that is the one thing that the UK can control whereas the level of emissions is subject to the winds of change in the world.

James Brokenshire: It is always a pleasure to follow the hon. Member for Wolverhampton, South-West (Rob Marris), who made a wide-ranging contribution. I intend to confine my comments to a narrower issue: the treatment of small businesses and, in particular, the introduction of the provisions to increase the corporation taxation rates for small businesses to22 per cent. from 19 per cent.
	We have heard much debate in the House, today and previously, about the fact that that increase in taxation on small businesses is intended to be neutral. The argument is made that the annual investment allowance of £50,000, intended for businesses to invest to grow, will counteract the increase in the headline rate. That certainly has not been the impression gained by small businesses. The chairman of the Federation of Small Businesses said:
	"This is the Chancellor's eleventh Budget and this year's offering is no different to the others—he gives with one hand and takes with the other. However, this year, after some welcome initiatives for our members he throws it all away with a tax hike aimed at small businesses. Corporation tax was cut for large firms but increased for smaller ones. Small businesses employ fifty eight per cent. of the private sector workforce—over twelve million people—and the increase in their tax rate fails to acknowledge their contribution."
	That comment reveals the concerns felt by small businesses across the country about what the changes will mean. The British Chambers of Commerce has talked of
	"the damaging increase in the Small Companies' Rate".
	The head of taxation for the Association of Chartered Certified Accountants said:
	"This decision flies in the face of the Chancellor's previous aim to encourage more businesses to incorporate and shows an irrational hostility to micro enterprises."
	The CBI, which does not necessarily focus on smaller businesses, has suggested that the changes will lead to "some significant losers".
	The changes certainly give the impression thatrather than its being simplified for smaller businesses, the tax system is being made more complex. It also comes against a background of change in the way in which tax is levied on smaller businesses. In 1997,the Chancellor cut the rate of taxation for smaller businesses from 23 per cent. to 21 per cent. He cut itto 20 per cent. in 1998. In 1999, he introduced the new 10 per cent. rate and in 2002 he cut the 10 per cent. rate to zero and the small companies rate to 19 per cent.In 2004, he reversed the zero percentage rate on distributed profits and in 2005 he abolished the zero rate altogether. In this Bill, the tax rate has gone up again, this time to 22 per cent.
	Such fluidity—so much change in a comparatively short period—makes it very difficult for small businesses to plan and work out a strategy. It is therefore interesting to consider the rationale advanced for the changes in the Bill. Paragraph 1.18 of the Red Book says that the change has been introduced
	"to tackle individuals incorporating to minimise tax and national insurance liabilities".
	In other words, it is an anti-avoidance measure, although we have not had the precise rationale explained at any point. I hope that when the Minister winds up the debate we will get some clarity about why such a draconian measure was felt necessary to combat that pattern of behaviour.
	The issue was recognised and debated when the zero rate band was introduced in the first place. Many businesses were actively encouraged to incorporateas a consequence of the prevailing tax regime. It is interesting to look back at the consideration of the Finance Bill in 2002, when that point was raised. It was argued that the zero rate would force companiesinto incorporation. The Paymaster General said in response:
	"We seek to strike a balance as best we can in not driving businesses into a particular structure. The balance is not perfect. The decisions that businesses take, the access they have to different relief and their structure are very much choices for them." ——[Official Report,  Standing  Committee F , 16 May 2002; c. 104.]
	That may be true, but the Paymaster General seemed to recognise that the possibility of small businesses taking advantage of the incorporation measures had been actively considered. It was understood that the changes in the tax regime might have that implication. I hope that the Financial Secretary may be able to comment on what went wrong and whether it was contemplated that companies that incorporated as a result of those changes might be in an uncomfortable position if the measure were reversed. Companies incorporate for legitimate reasons. The action is not necessarily driven by taxation reasons, and that factor should be understood in the context of such a big change to tax rates for smaller businesses.
	My fear is that some small businesses that incorporated under the earlier regime—in many ways, the Government encouraged them to do so—willbe trapped now that the tax regime is changing completely, with the implication that tax rates will be higher. As a former corporate lawyer—no longer practising—I know that changing from incorporated to unincorporated status is not without cost. Lawyers and accountants are required so that the company can break out of the incorporated mechanism. Many small companies that have legitimately incorporated, for whatever reason, will be in the difficult situation of having to decide whether to accept higher taxes or higher professional costs to change from an incorporated to an unincorporated structure—possibly their former status.
	Reference has already been made to small service companies. It will obviously be difficult for them to take advantage of the new tax breaks proposed by the Government as an offset mechanism. There is a strange irony in the fact that the Government are saying, "We shall increase your tax but you can take it back from us". The proposals underline the complexity of the Government's mindset.
	We need to address the valid concerns about companies that may be in financial difficulty. An increase in the tax rates applied to them might tip them over the edge if they were already in a precarious financial position, because they would certainly not be able to take advantage of the new mechanisms and benefits for companies that can invest. Evidently, they cannot invest because they are already in a difficult financial position. Given the problems that may arise, the neutrality of the measure is not as straightforward as has been suggested.
	The provisions on corporate taxation are complex—like the Budget itself. I was struck by a comment made by Andrew Tenon, a tax director at Tenon advisers, in an edition of  Taxation. He said:
	"We spent several hours on Budget day running numbers through spreadsheets trying to make sense of the various hints that we could pick up in the small print about what precisely the figures would be. It is a sign of just how complex this all is that, between us, with at least 100 years of combined tax experience, we could not agree on what the impact of the changes will actually be."
	If even learned tax advisers find it difficult to assess the effect on smaller companies of the changes in the Bill, it will be tricky, to say the least, for the companies themselves to work out what the impact will be and how to take advantage of the investment regime to ensure that the benefits are effectively applied. That comment and others clearly show the problems that arise from the complexity of the provisions and their application to small businesses.
	There seems to have been a complete reversal of the Government's approach to the treatment of small businesses over the 10-year period. We have almost come full circle in the latest Finance Bill. There is real concern that the Government are turning their face against small businesses, notwithstanding the fact that 99 per cent. of all enterprises are small. A huge number of small companies contribute a large amount to our economy, ensuring that it is vibrant and strong and continues to employ people and generate wealth in this country.

Andrew Miller: The hon. Gentleman is making an interesting point, but what does he think is in the best interests of small businesses? Is it the environment now or the environment when we had two major recessions, interest rates at 15 per cent., inflation in double figures and unemployment at 3 million? Perhaps he thinksthat unemployment at 3 million will be beneficial to small businesses. Was the environment better when his Administration were in control or is it better now?

James Brokenshire: The hon. Gentleman is drawing false parallels—perhaps understandably, to assert his case—but I certainly do not understand his comment that I support high unemployment. Obviously we want to generate employment and get people into work. One of the problems at present is the structure of the system, which means that labour is immobile. Too many people are trapped by social immobility, without the skills or opportunity to realise their potential to change their lives and make the most of their assets.I am passionately against that and it is highly unfortunate in many ways that growth in our economy has had to be driven by the importation of labour and that people do not have the opportunity to obtain skills, as Lord Leitch found in his report. There is a structural problem in our economy and it is not inthe hon. Gentleman's interest to suggest otherwise. We need urgently to deal with those skills issues to ensure that people can realise their potential and get into the employment that is denied them at present.

Robert Flello: I want to take a few moments of the House's time togo through a few points in the Bill that relate to my constituents. My hon. Friend the Member for Newcastle upon Tyne, North (Mr. Henderson) made some good points on the wider general implications of the Bill, but I want to look at its impact on my constituents and others in Staffordshire and to focus the debate more locally.
	The reasoned amendment refers to increasing competition from countries such as China and India and suggests that the Bill will cause difficultiesand problems. Perhaps it is because I am a fairly straightforward and humble chap, but that argument confuses me somewhat. China, India and the far east have had an impact on the work that was done for many years in the mines in my constituency before they were closed—

Robert Flello: Indeed, closed by the Tories. Those countries also had an impact on the Shelton Bar steelworks, which were just outside my constituency before they were closed under the previous Administration, and on the Michelin factory, which employs many thousands fewer workers than it did20 or so years ago and has changed the emphasis ofits work. However, it is still a very valued employer in the constituency. Furthermore, the pottery industry employs a fraction of the people it once did. None of those job changes was the result of the Finance Bill.
	Let us consider specifically the situation at Trentham Lakes, the site of what was the Hem Health colliery. More people are now employed on the site, albeit in completely different jobs, than when it was a colliery. Many people who work in the distribution centres used to be employed in the pottery industry and have acquired different skills.
	The reasoned amendment asserts that the Bill's complexity will somehow kill off or stifle the opportunity for businesses to grow. A few years ago, I did some work with the United States tax code and advised and assisted employees from the US working in the UK and employees from the UK going to work in the US. The US tax code is horrendously complicated. Indeed, one could almost say that ours is an open, brief and simple tax code by comparison. However, has the US suffered for years from a crippled economy that is unable to compete on a global stage? Are its businesses unable to do well? The facts on that speak for themselves.

Robert Flello: My hon. Friend makes an extremely good point. If an organisation is not willing to undertakethe training that the nation needs, we have to find alternative ways of funding the training through the tax system.
	My right hon. and good Friend the Chancellor the Exchequer made an announcement about raising education spending to £90 billion over the next couple of years. Those improvements and changes are what Finance Bills and Finance Acts bring about andthey are the backbone of British innovation. The proposed increase in the number of apprenticeships is fundamental to this country being able to take itself forward.
	I chair a Staffordshire taskforce that works with people who have been made redundant in some of the traditional industries and, indeed, some more modern industries. I am a member of Unity, Amicus and the Transport and General Workers Union, and Unity acts as the umbrella on the taskforce for a number of other trade unions and organisations. Through its excellent work, the work force are given the opportunity to gain the skills that they require and the modern market needs. We must make sure that the competitiveness of the UK economy is supported, and legislation, such as the Finance Bill, can aim to push through provisions for that.
	Those on the Opposition Front Benches said that the Bill could upset the economy. However, as other hon. Members have argued, we have an extremely stable economy. We have low and stable inflation. Yes,there are peaks and troughs within that, but overallthe situation is extremely stable compared with— [Interruption.] I hear derisory comments from the Opposition Benches. During the 18 years before the Government took office in 1997, the situation could in no way be described as stable or level. There was no considered growth during that period, with two deep and damaging recessions, as has been mentioned, and with inflation and interest rates out of control and at times changing almost daily.
	I recollect the tables produced by the Inland Revenue when I had the great good fortune of working for that organisation in the early part of my career. Tables produced for calculating the interest on the late payment of tax would be amended with frightening regularity because of the fluctuations in interest rates. The derision from the Opposition Benches seems to have stopped.

Stewart Hosie: What are the five tests that the Government set? What is the difference between those and the original five test for EMU entry? With reference to the intervention from the hon. Member for Wolverhampton, South-West (Rob Marris) about debt in Ireland, will the hon. Gentleman comment on the £1.3 trillion worth of personal debt in this country?

Robert Flello: I am grateful for the hon. Gentleman's intervention. In answer to his first question, I recommend to him the Library services across the corridor. On personal debt, the level is high in most of the advanced economies, like our own. However, I agree that there is cause for concern where people are taking on debt that they are unable to sustain. My views on that are on record.
	We can reject the first part of the reasoned amendment tabled by the Opposition, because it does not stack up. It does not make sense. As soon as one starts reality- checking, the wording falls away. I looked at the employment figures provided by the Library, which I again recommend to the hon. Member for Dundee, East (Stewart Hosie). The reduction in the number of people unemployed in my constituency, Stoke-on-Trent, South, is approaching 20 per cent. There is a huge amount of work still to do because I do not want any of my constituents to be without work, but the improvement has been incredible. That was made possible by provisions such as those in the Bill.
	My hon. Friend the Member for Wolverhampton, South-West made some valid points about the real reasons why 125,000 people are in the financial assistance scheme. It is right and proper that Back Benchers of the governing party put pressure on Ministers whenever possible, and I take the opportunity to do so now. We need to ensure that every single one of the pensioners who were adversely affected gets whatever help we can give them. I shall not adopt the Opposition attitude and suggest that we can wave a magic wand and put everybody in the position that they wish they were in and that they were promised by the trustees of their schemes, but equally we are not seeking a proceeds of growth rule that would mean that the money was not available to back up the promises being made.
	I hope that the review that is under way will ensure that the good provisions in the Bill, which I welcome, are built upon. Although the increase from £2billion to £8 billion projected costs, the 80 per cent. payout and the increase in the cap are all good moves, we should do what is morally right and push for as much help as possible to be given to those 125,000 people.
	Finally, I shall canter through the provisions of the Bill and how they will impact on my constituents. On the main rates of tax for financial year 2008 and the changes to the small companies rate, on which several hon. Members have commented, yes, there are concerns. There are small businesses in my constituency that will understandably be worried about the impact of future changes to those rates. However, the fall in the basic rate of tax to 20 per cent. must be welcomed. A large number of my constituents who receive tax credits will welcome both the drop in the basic rate and the increase in tax credits.
	Every Member of Parliament regularly sees people in their surgeries who have problems with the tax credit system, just as we see constituents who have problems with speeding tickets or with housing. We only ever see the downside. We rarely have anyone coming to us and saying, "This works for me", but when we are out on the doorsteps talking to people, we find time after time people who are being helped by tax credits. I welcome the proposals in that regard.
	As a non-smoker I welcome anything that persuades smokers to relinquish the habit, but I note that the increases in tobacco product duty are broadly in line with inflationary measures. The work that has gone on, separate from the Finance Bill, to help people kick the habit of smoking is the right approach. It is time for much more carrot and less stick in future years to move people away from an addiction to tobacco.
	On vehicle excise duty, I shall not detain the House by rehashing the enlightening discussion that took place between the hon. Member for Falmouth and Camborne and my hon. Friend the Member for Wolverhampton, South-West. I would not want to revisit an exchange that was at times, I think, painful for the hon. Lady.

Robert Flello: Indeed.
	On energy-saving houses, it is a little rich—to quote the phrase again—of Her Majesty's loyal Opposition to be critical of the provision relating to zero-carbon homes simply on the grounds that there are not any, or that there are very few. The point was made earlier that when there was a reduction in the rates of duty on unleaded petrol to persuade people to go down that route, we heard comments that only a handful of garages in particular areas sold unleaded petrol. But as a result of measures in the then Finance Bill, people were persuaded to change their habits. They moved to driving vehicles with unleaded fuel. I hope that the relief for new zero-carbon homes will persuade people that it is right to move towards having zero-carbon homes. Any assistance in that regard has to be positive.
	Criticism was made about domestic microgeneration. Given that the Leader of the Opposition has or had a wind turbine— [ Interruption. ] I understand that it has been removed. That is a great pity. That would otherwise have been a good example.
	I do not want to detain the House by rehashing the arguments and discussions about managed service companies. We need to make sure—the Finance Bill moves in the right direction—that there is fairness and that we do not have a situation in which somebody decides to adopt a particular corporate or non-corporate structure purely for a tax advantage rather than because it suits their business. I am sure that most businesses in that situation would not dream of using the tax system for pecuniary advantage, but the provisions make sure that that is so. I hope and expect that in Committee some of the corners will get knocked off and things will move forward.
	I do not want to detain the House by exploring what has already been debated in a good and positive fashion this afternoon. I hope that a lot of the points that have been made by me and other right hon. and hon. Members will be taken on board by the Minister when looking at the issues.
	I want to close with a plea about the regional impact—something that was mentioned by my hon. Friend the Member for Newcastle upon Tyne, North (Mr. Henderson). With my wider Staffordshire hat on as chair of the taskforce, as well as my constituency hat on as the Member of Parliament for Stoke-on-Trent, South, I think that we need to make sure that when the Finance Bill and wider provisions—designed to help, guide and promote different industries—are brought in, stronger direction is given to regional development agencies to make sure that there is a much greater focus on the types of business that they are promoting in different areas.
	A number of potential large employers wished to come to Stoke-on-Trent, but, unfortunately, the office space in the city was not sufficiently large to accommodate them. So, a large number of extremely well-paid, high-skilled jobs were not able to come into the city. That was a terrible loss for an area such as Stoke-on-Trent, which has fantastic people who are able to learn specialist, complicated and creative skills. The lack of office space meant that we did not get those jobs. However, the regional development agency had been in place for some time and did not hesitate to ensure that distribution sheds were built. It pushed that aspect. It is just a pity that the opportunity was not taken some years back to make sure that some large office space was built quickly. I make a plea to the Minister to turn his eye in that direction.
	All in all, it is a good Bill. As has been mentioned, it could perhaps go a little further in some areas. I do not take the point that the Liberal Democrats made about its being an over-burdensome, over-complicated Bill—particularly given that they then contradicted that point by saying that the Bill could do with more clauses relating to aircraft flying over rural areas of their constituencies. I certainly commend the Bill and I hope that it will receive support from both sides of the House.

John Redwood: I am a non-executive director of companies and I am also a trustee of a pension fund, as declared in the Register. I would like to begin by speaking to the amendment in the name of my right hon. and hon. Friends, beginning with the most important case set out in that amendment: that the Finance Bill fails to equip the UK to compete in the globalised world economy in the face of ever-increasing competition from India and China.
	Whenever Opposition Members venture criticisms of the current state of economic policy and tax policy with respect to competitiveness, we hear from the Labour party—as we did again this afternoon—that things were worse during the worst period of the exchange rate mechanism. That is not only ancient history, it is agreed ground across the Floor of the House. It ill behoves those on the Liberal Democrat Benches to join in. They should understand that they strongly recommended that this country join the exchange rate mechanism and link its currency tothe Deutschmark. It is even worse for those on the Government Benches constantly to throw this back at us, when the Chancellor of the Exchequer was a keen advocate of linking our currency to the Deutschmark and has never yet apologised for the mistake that he made.
	Of course, it was the Conservatives who made the mistake in office. The Conservatives have long apologised for it, moved on and learned from the mistake. I hope that the Government have learned from the mistake as well. There are some indications that they might have learned from it, because at the moment they do not wish to take us into the euro currency. The ERM was a stepping stone towards the euro, and had we gone the full way we might have had boom and bust—high interest rates and then low interest rates or inappropriate interest rates—because we would have been committed to the euro.
	I just wish that the Government would learn the full lesson of those bad periods in the early '90s. Surely the full lesson is learned only when a party comes out and says that it must be no to the euro—just as it must always be no to the exchange rate mechanism. We tried it. All three parties wanted it. Some of us disagreed. It failed. Now it must be no to the euro, as the hon. Member for Wolverhampton, South-West (Rob Marris) quite rightly said. I would feel happier if the Chancellor of the Exchequer would rule it out in principle for all time, instead of constantly going through this nonsense that there have to be five tests, and that there might be circumstances in which the euro would be a good idea.
	If we wish to compete successfully in the world economy, we need to understand the weaknesses of our current position, as well as its strengths. My party and I have been the first to admit that it is not bad news that we had growth continuously during the last years of the Conservative Government and that we have had growth continuously during the Labour period. My party is delighted that we have had, on average, worldwide, low interest rates over the last decade. That climate has been extremely helpful. My party is glad that China and India have emerged as economic titans. They are so competitive that they are now helping growth in the world, because as well as producing good-quality cheap exports, they need imports, and because their cheap exports enable us to keep inflation down at a less penal cost in terms of interest rates and money control than we would need to incur were it not for that Indian and Chinese competitiveness.
	However, the Government must understand that it is now 2007 not 1992, that an awful lot has changed since 1992, and that although some things are better—many of them because of the world background although some of them because of decisions made by Governments since 1992 and the exit from the ERM—there are still many things that are not ideal, and are limiting our ability to compete with the extremely competitive world economies emerging in Asia.
	I asked a Labour Member if he was happy debating the Finance Bill and the tax incentives and changes for business against the background of the recent news that a large British shipyard is going to be literally unbolted and transported to Asia so that advantage can be taken of the better organisation and lower labour rates, and use can be made of the capital equipment that once fuelled a mighty British industry. I am sure that Labour Members are not happy about that. I am sure that they are not happy that Rover went bust on their watch, and that some of the equipment from the Longbridge plant was taken to pieces and exported to China so that Nanjing Auto can now make cars in China instead of in the United Kingdom.
	We in this debating Chamber should ask ourselves collectively whether such accidents can be avoided in the future. Are there things that we could do through the Finance Bill that would create a more favourable climate for business here in the United Kingdom? The answer is yes. Things could be done to make it easier for manufacturing businesses to survive and flourish in the United Kingdom and to make it less likely that those businesses would go bankrupt, have to sell up, or have to sell some of their prime assets or capital equipment to companies in China and Asia that would use that plant and equipment to compete againstus and undermine other countries in the United Kingdom.
	The Government understand part of the argument. I am delighted that the Bill and the Budget show that the Government see the need to lower the corporationtax rate in the United Kingdom. There is abundant evidence from throughout the world that countries that set a tax on profits markedly lower than the world average do a great deal better than the rest of theworld at attracting new investment, encouraging new company formation and attracting large enterprisesto choose that country to establish new plants to undertake their activity.
	The single most important reason why Ireland has grown rapidly over the past decade or so has been its attractive corporation tax framework. The United States is far richer per head than we are, and despite starting off as a richer country, has grown faster than us for nine out of the 10 years for which the Chancellor has had responsibility. Again, lower tax rates on personal incomes and company profits—if one is established in the right state of the Union—have been an important influence on the United States of America's better competitiveness. The countries in Asia that are doing best usually have a tax regime that attracts investment in the sectors and industries that they are keenest to attract.
	The second thing that an economy needs to be attractive and competitive, and to take on the emerging might of China and India, is regulations that are not too complicated. This country is in danger, through regulations made by the House and by accepting a great deal of the regulation designed in Brussels, of over-regulating companies that are already here and creating a framework of over-regulation that will deter companies from coming here.
	Hon. Members have drawn our attention to the growing complexity of tax legislation on this Government's watch. The great increase of the number of pages in Tolley's tax manual is one indication of how the complications have increased. However, while the clauses before us make up a Finance Bill that is relatively slender by the Government's standards, that is because in most areas the Bill just says that something will be done to a tax measure, and more of the detail is in the many pages of schedules. In due course, the Treasury will probably produce lots of secondary regulations that will have a direct bearing on business and lots of interpretative documents that tax lawyers, company directors and others will have to master to determine their legal due to the Government, and so that they can find out whether the regime is still sufficiently attractive to allow them to carry on their business here.
	The Government should take on board the warning about the complexity of tax legislation—and I am delighted that the Economic Secretary to the Treasury is in the Chamber, because he has been carrying out interesting work with those in the City who are worried about how competitive our tax system is.
	The third important issue is whether we still have a fair system that is properly and consistently enforced by a Revenue that does not regard everyone and every business as someone who is trying to break the law or get away without paying a reasonable amount of tax. Many businesses have become concerned in recent months because they feel that the reasonably fair-minded Revenue now goes on fishing expeditions and tries to reopen old years that the businesses thought had been honestly and honourably settled. There is a worry that too many people who have been successful and made money individually or through their companies are being challenged unreasonably.

John Redwood: I was careful not to condone anykind of fraud. If someone is guilty of deliberately misleading Her Majesty's Revenue and Customs by not giving the correct information, or any information at all, enforcement measures must be taken. My party has always said that and the Government always rightly do that—that seems to be a perfectly fair system. I am getting reports from people who are nervous about being named because they do not think that the system is entirely fair any more. They say that there is a feeling that matters that were thought to have been honestly and honourably settled can be reopened because the Revenue takes a different view of a measure in tax legislation than that which it accepted, and whichthe company's tax lawyers and advisers put to it, when the figures were settled in the first place.
	The Government need to be careful. Of course they wish to raise as much revenue as possible without apparently upping the rates, but if too much of the philosophy and mentality of Customs and Excise is inserted in the Inland Revenue and operated against law-abiding businesses and people who just happen to be successful, the impact will be the opposite of that which the Government want. The country will merely be given a reputation as the kind of place in which people will not want to base their businesses or tax affairs because they fear that they will not be treated fairly, or where they will never know where they are, because something that was thought to have been settled with the Revenue will turn out not to be have been settled at all.
	If the hon. Member for Luton, North (Kelvin Hopkins) does not believe me, he should talk to the people to whom the Government have been talking. They will confirm that the business side is worried. If that worry becomes more general, it will put big companies off coming to this country and encourage more big companies to do what Shell and some of the banks are doing: think of taking their headquarters offshore and going to a different tax jurisdiction that might not only have lower tax rates, but give a fairer response to their honestly filed tax returns, and a clearer answer.

John Redwood: On the contrary. Of course people have to pay the taxes that are due. However, wenow have the combination of thousands of pages of extremely complicated tax law and a fear that those who interpret the law—the tax inspectors—can change their minds. For example, a company could have honestly settled its tax affairs for a particular year with a tax interpretation that has been signed off by not only their tax advisers and accountants but by the Revenue—and then the Revenue can come along and say, "Actually, we've changed our mind. We don't think that that clause meant this; it meant something else." I am not talking about companies that are trying to get away with something.
	Companies want certainty about how much tax they should pay in a given year. They take advice from tax lawyers and accountants and put a proposition to the Revenue. If the Revenue accepts the proposition, that should be the end of the matter. It should not be possible for the Revenue to reopen the case later and say that it has changed its mind. If the Revenue were to think that a company's original filing misunderstood the tax law, it would be its duty to say, "We think you've misunderstood this point. This is how we interpret it; will you ensure that your filing is in line with that?" The process is iterative and requires discussion, because these matters are not as pure and simple as the hon. Member for Alyn and Deeside (Mark Tami) implies. Incredibly difficult judgments must be made, because of the thousands of pages of opaque material that the House passes as successive Finance Acts; we are discussing several hundred rather difficult pages today. It is not easy for law-abiding, decent citizens to know exactly what the legislation means, so they expect a bit of understanding from the Revenue.

Daniel Rogerson: Does the right hon. Gentleman agree that smaller enterprisesare fearful of experiencing problems because of the changes in HMRC that are moving it towards more of a call-centre approach? The closure of more local offices is threatened, which will make it more difficult for people to access someone to address their concerns.

Edward Balls: I assure the right hon. Gentleman that I have no intention of rushing out a press release. I was just interested in his views; as he will know, I have been a close follower of them for many years, and we have always enjoyed our debates. I am just worried that his position may be shifting. He previously supported a steady fall in spending to 35 per cent. of GDP. Is that no longer his medium-term objective? He has not been persuaded to back off from his previous positions,has he?

John Redwood: I do not remember ever being so incautious as to name a figure as a proportion of GDP. The amount of spending depends entirely on the state of the cycle, the growth rates, the public spending needs and so forth, and those judgments have to be made from year to year, much as the Government are trying to make them this year, for the economy in its current state of play. I have no idea what judgment it wouldbe appropriate to make for 2011, which may bethe first Budget year for an incoming Conservative Government. It would be wise for my right hon. and hon. Friends on the Front Bench to continue to be a little cautious about making pledges on such matters until we are nearer that point, when we will have more information, as the Government do.

John Redwood: No. I am sure that the report will be published; the issue is whether it will be published as a serial or in one glorious complete whole. Who knows? There may be so much demand that we need to publish it chapter by chapter, which might delight the audience and allow Ministers more time to read each piece and deal with it as they see fit. They could go through it and decide, "Those two ideas we will adopt; those three are rubbish." I might recommend to my right hon. Friends that to make the Government's life a bit easier we should give them more time by publishing it in bits and pieces. We have already published one or two things, which I am sure Ministers have already read and are deciding what to do about.
	Having dealt with global competition, the Opposition's reasoned amendment goes on to talk about our dislike for penalising small companieswith higher tax rates and a more complicated tax system—an issue that Liberal Democrat Members tried to draw me into a little prematurely. My hon. Friend the Member for Chipping Barnet (Mrs. Villiers) has already made a powerful speech about how unfortunate it is for small businesses that under this Chancellor there have been so many changes in rates and so many different signals over whether small businesses are welcome.
	In the middle phase of the Chancellor's period in office we felt that he was keen to raise the rate of small business formation, which is a very good thing to do. He sent strong signals by offering the zero rate—one cannot send a clearer fiscal signal than that—and it clearly started to work. It was miserable of him then to start saying, "Gosh, we didn't expect that people would actually incorporate," or, "Look at this—so many people are incorporating that here's a wonderful source of revenue." Step by step, including in this Bill, he has gradually upped the rate until it is no longer attractive as an incentive, as was originally intended.
	That is a great pity. It is incumbent on us, as tax legislators, to send strong and consistent signals, and if the Chancellor wishes them to work and get companies and individuals to respond as he chooses, they must be applied over a period of years. It is no good putting in an incentive in one year and then ditching it in the following year— [ Interruption . ] Do Ministers wish to intervene again, or are they just having a private conversation?

David Taylor: While the right hon. Gentleman is in reminiscent mode, could he remind the House—perhaps this ispart of the leaden legacy—what proportion of gross domestic product was public debt when this Government came to power in 1997?

John Healey: Perhaps I could help the right hon. Gentleman. In response to my hon. Friend the Member for North-West Leicestershire (David Taylor), the level of net debt when this Government came into office was 43.6 per cent. of GDP; last year, it was a little over37 per cent.

John Redwood: Again, the world has moved on. In 1997, companies did not have to put pension deficitson to their balance sheets, and neither did the Government, so there was symmetry. Now, companies have to put pension deficits on their balance sheets, whereas the Government do not. The other big difference is that, in 1997, most pension funds were in surplus, as there were not these huge liability problems; now, they are in massive deficit. I have been persuaded that it is right to recognise those deficits and to require that they are properly reported. The Government should have to produce an accurate and honest figure with their actuaries for the pension liability deficit in the public sector. Any sensible analyst would then add that to the borrowings through the gilt market that the Minister reported to the House.
	PFI liabilities are being understated. It is a question of the quality of the schemes and the likelihood of their going wrong, and the Government needing to spend a lot of money to reinstate the public services that were covered by them. There has been a massive build-up in PFI activity—the Minister will be proud of that—and it is now so important to the public accounts that it is misleading not to put on a much bigger figure for PFI liabilities on a contingent basis.

John Redwood: Of course, if one changes the accounting rules and puts on extra deficits, the deficit will be bigger. In 1997, the Conservative deficit would have been a bit bigger than the one that the Minister quoted, but this Government's deficit would be massively bigger because, over the following 10 years, there has been a huge surge in pension and PFI liabilities. One reason why it now matters much more that PFI liabilities are not properly accounted for is that their quality has deteriorated. Under the Conservative Administration, when there were not many PFIs, there was a much greater attempt to ensure that there was a genuine transfer of risk to the private sector so that, if the scheme went wrong, the private sector, not the public sector, had to pick up the bill.I do not believe that that is true of the London underground public-private partnership, which constitutes a massively expensive and risky set of arrangements stretching over 30 years. I am not sure that the Government accounts reflect the full consequences of the cost of that scheme.

John Redwood: If the hon. Gentleman examines the record, he will realise that I made health the No. 1 priority in the Welsh Office budget. I made considerable increases and backed several schemes to improve Welsh hospitals. I also kept smaller hospitals open—I understand that that is now more trendy with the Government after a time when they subscribed to the "big is best" idea that closing them made sense. I shall not therefore take any lessons from the hon. Gentleman about being nice to smaller hospitals that need investment.
	The amendment goes on to discuss the "U-turns on pensions policy" and the failure
	"to tackle the UK's worsening pensions crisis".
	We have heard a lot already about the subject, especially from the hon. Member for Wolverhampton, South-West (Rob Marris). It would be wrong to re-enact our debate last week on that important subject.
	I agree with much of what the hon. Gentleman said about climate change but, in the least convincing part of his speech, he said that there were bad people around and that they had damaged pensions. However, the one "bad person" whom he did not mention was the Chancellor of the Exchequer. I am delighted that he admitted that, if one removes £5 billion a year of tax credit from the pension funds, they are worse off. Itwas extraordinary last week to hear the Chancellor answering my intervention by saying that they would not be worse off and that it was fine to take £5 billion from the pension funds. I believe that he also said from a sedentary position that, if I took away 20 per cent. of his income, he would not be worse off, either. My response is, may we please take away 20 per cent. of his income and give it to the pensioners who are suffering, because they would find that valuable, even if he does not think that a fifth matters much?
	We cannot get away from the fact that the tax raid on pension funds did much of the damage. Actuaries and some of my hon. Friends have referred to the figure of £100 billion. That is a little more than the current accumulated deficit of the main funds, as recently stated. That symmetry is interesting.
	The hon. Member for Wolverhampton, South-West is right that there is good news in that people are living longer and that that has a cost for pension funds. If one takes a piggy-bank approach, the cost is taken care of by the increased contributions that companies are now making, recognising the extra longevity to which the actuaries have woken up in the case of the pension funds. One is left with the rather neat symmetry that the combined pension deficits equal the amount of money that the cumulative effect of the removal of tax credit had taken out of funds, and that the deficits are now fortunately reducing because much extra money has been put into the funds—contributions are increasing because they are, at last, being a bit better managed.
	Funds are now benefiting from the small increase in or stabilisation of the yield on long gilts in the past few months. When the long gilt yield was falling, the deficits continued to rise because that was the way in which the sums were calculated. It did not necessarily mean that the pension funds could not pay the pensions. The Chancellor's success at selling billions and billions worth of Government debt on ever lower interest rates was one reason why the pension funds were so badly exposed because of the way in which the figures were calculated.

Paul Farrelly: Does the right hon. Gentleman agree that one of the problems with British business hasbeen a lower propensity to invest than some of our counterparts in the rest of the world and that that is partly due to the immense pressure on publicly quoted businesses to pay out larger dividends than in other countries? Does he also agree that any measures to level the playing field and encourage investment benefit our prosperity and pensioners over a longer period?

John Redwood: It is certainly true that the spot price is now lower than when we had a crisis, but people are still deterred from increasing their investment here or coming here to invest because of that volatility and because the spot price might move up again. Worse still, it could be possible to run out of gas completely. We reached that very difficult position the winter before last, when a shortage was a consequence of the fact that the right decisions had not been taken to put the necessary measures in place.
	Do I support any EU attempts to solve this problem? Of course I do. What is the EU meant to do? It is meant to apply competition law to the gas industry in Europe so that when there is a shortage in Britain in future and we are sending strong price signals that we would like to buy more gas, more gas is actually forthcoming. It was a disgrace that the EU was unable to get the gas market to clear properly when Britain was bidding much more than the continent for gas, but the gas was not made available. I hope that the EU will solve that problem, but I fear that it is not about to, so the solution must lie here in Britain with a combination of financial measures and giving the right encouragement to the industry to put in the facilities that are needed to get available energy supplies competitively. New businesses here would then meet higher standards of energy conservation and fuel efficiency.
	Our amendment says that we do not believe that the Government are getting very far in tackling climate change in the Finance Bill—and I agree with my right hon. Friends about that. I noticed that, under the section headed "Environment", the Government put through a number of increases in fuel duty rates. I am sure that the Government would say that it is good to make petrol and diesel dearer as it may deter people from using as much at the margin.
	It is curious to note that in clause 10, there is a 2p increase in biodiesel and bioethanol on a price baseof 28p and only a 2p increase in standard petrol and standard diesel on a price base of 48p. The Government are sending out a signal that they want people to stick with the more polluting methods and not switch to biodiesel and bioethanol at the margin, because there is twice the rate of increase on the fuels that are apparently more friendly than there is on the less friendly fuels. If we look at road fuel gas, which I thought should have a lower rate of duty because it is thought to be more environmentally acceptable, we see an increase of almost 3p on a 10.8p base, compared with 2p on a 48p base for standard petrol and diesel. That takes a bit of explaining.
	Other Members referred to air passenger duty as being a clumsy mechanism for getting to grips with inefficient aircraft—older aircraft in the main—and air services that do not have many people on them. I agree with those who say that if we are to use tax as a means of trying to reduce air passenger journeys at the margin—it will reduce the growth rate rather than cut it—we need to look into ways of trying to capture what is meant to be the mischief here, which is people travelling on planes with not many people on them or travelling on old or dirty planes or a combination of the two. Clearly, there is a green case to be made there.
	Any Government keen to do something about carbon output should do more audit work than the present Government have so far done on the ways in which carbon dioxide is emitted into the atmosphere. There are some glib assumptions in the present debate that are not always true. It is assumed that trains create no carbon dioxide emissions and are always a good thing because some of the sums are computed on the basis that trains run on nuclear power-generated electricity. However, even electric trains use a mix of electricity, including some electricity produced from fairly old and dirty coal power stations.
	It is also assumed that buses are always better than cars, but it depends on how many people are travelling on the bus and how old it is. On average, buses are very old and have very few people on them, so the bus is not always the immediate green answer. If we are to take the issue seriously, we need tax incentives to promote new buses and we need a transport Minister who can design bus services that people, along with industry, want to use in order to make it a green option, which it is very often not at the moment. I believe that we will solve most of those difficulties through technology, which is making far bigger strides in greening private motorised transport than in greening either the train or the bus.
	Similarly, we need to do a proper analysis on the home of those measures that can make a really favourable impact. I understand the Government's argument that they wish to reward zero-carbon homes. I am not one of those to make cheap jibes aboutthe matter tonight, because I am happy for the Government to reward something, and if it is possible to have a zero-carbon home and people are clever enough to implement it, I am happy for them to get off paying a bit of tax for the privilege. However, it is fair to note that that will not be a great world-beating policy. At the moment, it is difficult to secure a zero-carbon home and there are not many people immediately volunteering to get that particular tax relief.

Mark Tami: The right hon. Gentleman mentions a raft of measures that he believes could be taken. I believe that what we really need to do is invest in the next generation of nuclear power stations, but it is something that his leader seems very coy about. Does the right hon. Gentleman agree with me on that?— [Interruption.]

John Redwood: It is quite possible that house prices will be higher in 2010 than they are today, but I would not call the present economic conditions a boom. That illustrates the fantasy world in which some Labour Members live. They really must accept that an inflation rate of 4.8 per cent. is a disgrace. It is far higher than that of all our leading competitor nations. We must compare ourselves with the world as it is, not with the world as it was 15 years ago when everyone was performing rather less well than they are today. That inflation rate is too high. Our interest rates have been consistently higher than those of Japan, the United States of America and euroland throughout this Chancellor's watch, and they are still at the high end worldwide. When companies think about where to borrow, Britain is not the best place to go, by quite a long way.

John Redwood: It is true that, at the beginning of the period when Japanese rates were zero, Japan had no growth and that, once or twice, it was even going backwards, but that is not true today. Japanese interest rates are still only a fraction above zero, yet Japan is growing quite quickly by the standards of the advanced countries. The hon. Gentleman should not be so complacent. We have heard much complacency from Labour Members in this debate. They have consistently made two claims. The first is that everything is now wonderful, thanks to this Government, yet they have refused to look how we are doing against the international background. The second is that the Conservatives are not allowed to say anything, because things went wrong in 1992. I have gone over that subject endlessly: yes, we know that, we have said sorry, and Labour Members should learn from those mistakes as well. They shared those mistakes, yet they have never had the courage to admit in this House that they got it wrong in exactly the same way. It did not happen on their watch, so of course they have not paid the price that we paid, but we have paid that price. Would they really like us to spend all our debatingtime going on about the winter of discontent, which happened on the watch of a previous Labour Government? I do not do that, because there is no point. It was a long time ago.

Paul Farrelly: I might have missed it—it might not have been reported—but will the right hon. Gentleman remind us when the right hon. Member for Witney (Mr. Cameron) said sorry? As I recall, he was a special adviser to the Chancellor of the Exchequer in 1992.

John Redwood: That would be a very enticing prospect, but I do not think that it is about to happen any time soon under this Government. There is a serious problem for the incoming Chancellor of the Exchequer. If he or she meekly accepts everything that has been laid out for next year's Budget in this year's Budget, people will say that this man or woman is not a serious Chancellor of the Exchequer, that they have no independent judgment and that they are just a lackey of the Prime Minister. If, however, the new Chancellor were to go next door and say, "I've been thinking hard about this. Too many Labour Members don't want the 10p band abolished. We're going to have to keep it", they might get a very frosty answer from the person who has just given them the job.
	The present Chancellor has unwittingly made life difficult not only for his successor but for himself, because it will become a test of whether the new Chancellor has any bottle, substance or depth: whether they meekly accept all the measures that we havebeen told about—some of which will not have been legislated for—or whether they will see the need, in the probably different circumstances of next year's Budget, to make changes.
	I put that forward as an analyst; I am not making a party political point. It is not my problem but one created entirely by the Chancellor. What he thought was a clever move—doing two Budgets in the same year—will turn out to be one of his mistakes. It will place his successor in an impossible position and the journalists will soon start to say, "Surely this is a test of whether the new finance team at the Treasury haveany independence of judgment and can adjust these things." It is unusual in a system based on annual judgments about the state of the economy and taxation, to make judgments a year ahead—or several years ahead, in the case of the judgment on inheritance tax.
	I have been clear in saying that we need to set a course and stick to it without chopping and changing. We should not offer a tax incentive one year and withdraw it the next, because that is difficult for people to follow. But I have also said that I do not want our Front Bench to set out detailed tax proposals for three or four years hence. That would be too difficult to gauge because the world is too uncertain. It is surprising that, in the case of at least one tax in this Budget, we are being asked to legislate for the next decade. That seems premature, even though the movement is in the right direction and very welcome.
	I shall conclude my brief remarks— [ Laughter. ] My brief remarks have been slowed down by many interventions. I conclude with this summary. Labour Members are far too complacent. It no longer serves proper debate to go back over things that happened20 years ago—Attlee was not very good either, but we are too polite to mention it—and we now need to discuss the current state of the British economy. Interest rates are too high, inflation is too high and taxes are still too high. We are not competitive when compared with the best countries around the world, and some patient work now needs to be done, in the way that I have suggested, to put those things right.

David Gauke: It is a great pleasure to follow my right hon. Friend the Member for Wokingham (Mr. Redwood), who gave a splendid speech. He tried valiantly to remain in order and discuss the subject matter of the Finance Bill, despite frequent interventions tempting him in other directions. Indeed, it was a pity that his speech came to an end just when he was getting into his stride.
	This has been a curious debate because, in my limited experience in the House, debates on Finance Bills are often closely related to the Budget debate. Finance Bills usually implement the key measures in the Budget but, on this occasion, that is not quite how it has worked, because many of the controversial headline measures in the Budget will be implemented not in this Finance Bill but in future ones. Although the Chancellor joked in his Budget statement that he did not have any intention of performing the roles of Chancellor and Prime Minister simultaneously as Mr. Gladstone did, it appears that to some extent he has done his successor's job in advance, as he has already written large chunks of the next two Finance Bills. It is clear—and my right hon. Friend the Member for Wokingham alluded to this point—that he will take the role of First Lord of the Treasury extremely seriously. Indeed, I wonder whether the term, "Chancellor of the Exchequer", will fall into disuse and, for the next two or three years, the occupant of No. 11 Downing street will be known as the "Second Lord of the Treasury".
	It is customary for the Select Committee on Treasury to produce its report on the Budget on the day on which the Finance Bill receives its Second Reading. As the only member of the Treasury Committee to attend today's debate, I believe that it is worth drawingthe attention of the House to that report, as thehon. Member for Falmouth and Camborne (Julia Goldsworthy) did. There is one part of the report to which I should like to refer—the Chief Secretary referred to it, as did the right hon. Member for Birkenhead (Mr. Field)—as it deals with the evidence that the changes announced in the Budget will result in 5.3 million households being worse off, principally because of what is often referred to as the abolition of the 10 per cent. band but which, perhaps, we should refer to as the doubling of that band to 20 per cent.
	In evidence to the Committee on the Wednesday, the figure of 5.3 million was more or less confirmed by a Treasury official, who said that it was in the right region. I suspect that the Chancellor did not appreciate that answer a great deal, because the next day that official, Mr. Mark Neale, was due to join him in giving evidence to the Committee but, at very late notice, he was withdrawn. It would appear that that answer, along with one or two others which, at the time, the Committee thought were helpful, were rather too open and transparent. I hope that Mr. Neale is well and has not damaged his career prospects in any way.
	The Chancellor made two arguments against the5.3 million figure used by the Institute for Fiscal Studies, the first of which concerned the impact of increases in the minimum wage. Having looked at the figures, I understand that the number of people earning the minimum wage who are likely to be losers under the Budget is, on the basis of a parliamentary answer that I received earlier this week, 171,000 at the absolute maximum. Clearly, that is not a substantial number, given that 5.3 million households will be worse off. The Chancellor's second argument was that there would be an increase in the take-up of working tax credit. No particular evidence was provided as to why that should be the case, and we will obviously watch that figure very closely to see whether there is evidence of increased take-up.
	I want to concentrate on the issue at the heartof the Finance Bill: corporate taxation, which hasbeen touched on by right hon. and hon. Members. Government policy in that area is, to some degree, inconsistent and incoherent. First, there is inconsistency in the Government's approach between mainstream corporation tax and small business corporation tax. There will be a cut in the rate of mainstream corporation tax not this year, but next year, as well as the abolition of certain allowances. It would be churlish to be entirely critical of that, as there are arguments for doing so. Greater simplification is an important objective in our tax system, and I think that I have heard Government spokesmen say that they were doing so partly for simplification reasons. I donot know whether the Government consider that simplification is an important matter in taxation policy. If they do, they have not been successful in achieving it in the past 10 years. None the less, I welcome that change.
	While the Government have moved in one direction on mainstream companies, they have moved in the other direction with small companies, as the rate has been increased and allowances have been reduced. Before turning to that in greater detail, and although, as I said, I welcome the proposal on mainstream companies in principle, I should like to ask the Financial Secretary a couple of probing questions. Some of the evidence that the Treasury Committee received suggested that some companies will clearly benefit—services will generally benefit—whereas other companies that rely on capital allowances willnot be favoured and will in fact suffer, including manufacturers, farmers to some extent and, as was particularly highlighted, property infrastructure providers, who will lose out. It is worth asking one or two questions in that context.
	First, if we are looking at major infrastructure projects, the Olympics immediately spring to mind. Will companies that have been contracted to develop infrastructure projects in the next few years for the 2012 Olympics lose out as a consequence of the changes to capital allowances? If so, is that something that they must bear or is it possible that contracts will be renegotiated? Indeed, could the financial stability of those companies be put at risk? Certainly, part of the evidence that the Select Committee received suggested that there was a potential problem.
	Secondly, there are concerns about private finance initiative projects. Lawyers have put it to me that some of the contracts—by no means all of them—entered into for PFI projects contain terms whereby, if capital allowances are changed, the consequence would be borne not by the contractors but by the Government, which may have an impact on the public finances.

David Gauke: The hon. Gentleman is missing my point. I am making inquiries of the Government about concerns, which have been raised, first, with the Treasury Committee, and secondly, in private, that certain aspects of the policy need to be examined. AsI said, I am not being particularly critical of the Government on that point, but merely inquiring whether the policy has any downsides that have not previously been revealed.

Stewart Hosie: The problem with PFI is not simply the £169 billion-worth of payment liabilities, upfrom £142 billion 12 months ago, but that the PFIs themselves are not clear. The Red Book says:
	"These contracts contain periodic reviews every 7.5 years and therefore the service payments are not fixed after 2009-10".
	Is not the problem that those are dreadfully expensive, and in some cases extraordinarily so, and yet there is no clarity whatever about the outstanding total liability or the capital cost that leads to that liability?

David Gauke: The hon. Gentleman is leading me in the direction of a wider discussion of PFI, and he makes his point well. My intention, however, was to raisea specific point in the context of the changes to corporation tax allowances announced in the Budget.
	The issue of small businesses is more controversial, and there is an incoherence in the Government's approach to distinguishing between incorporated and unincorporated businesses. Admittedly, the Government face a difficult problem: incorporated businesses can distribute profits either through dividends or salaries. If they do so through dividends, the taxation system for companies will apply; if they do so through salaries, income tax will apply. That issue has become more substantial and difficult for the Government in recent years, as corporate taxes have fallen relative to personal taxes. That is partly because of cuts in rates. My right hon. Friend the Member for Wokingham said how the international climate has changed substantially for corporation tax rates. We have also seen increases in national insurance contributions. However, the differential between the two systems has increased substantially in recent years.
	As my hon. Friend the Member for Hornchurch (James Brokenshire) said, Government policy has driven that. There are various rates. The history of the zero percentage rate, an issue arsing from last year's Finance Bill, is instructive. The 10 per cent. band was introduced in 1999. By 2002, it had become a zero per cent. band, introduced for the purpose of encouraging growth and entrepreneurial spirit. Inevitably, as predicted by the Institute for Fiscal Studies and accepted by the Government, sole traders incorporated. It was an entirely rational thing for them to do. The consequence was that the Government perceived that they were losing too much revenue—hence the introduction in 2004 of complex anti-avoidance measures and the abolition in 2006 of the zero per cent. band.
	During the entire period, enormous time, effortand cost were incurred by various individuals incorporating. Indeed, the Government appeared to be encouraging them to do that and benefit from a lower tax regime. The consequence was that they were castigated and treated as tax avoiders. They were practically treated as cheats. That did nothing forthe relationship between small businesses and the Government, and it increased the difficulties of the two systems running in parallel.
	Even following the abolition of the zero per cent. band, it is still advantageous to be incorporated in most cases. In that context, the Government have changed the system once again by raising rates, as announced in the Budget, beginning with the increase from 19 to 20 per cent. in the Bill. I do not know whether the Government's intention ultimately is for the two systems to be tax neutral. We are some way from that. In most cases, it is still better to be incorporated because there is just corporation tax, whereas with employment there are income tax and national insurance contributions. However, if the intention is to be tax neutral, will the Government do anything to encourage those companies that have moved into the incorporated sector to move out again? If so, many small businesses will be concerned thata decision to disincorporate will be treated as adeemed transfer of goodwill, and they will want disincorporation relief to secure their financial position. Again, it is not entirely clear what the Government want to do.
	I said that the approach is incoherent. In an attempt to solve the perceived problem with incorporation, the Government have increased the rate of corporation tax, but they have also raised the application of national insurance contributions, as announced in the Budget, while also increasing the threshold for higher rate income tax, which means that it would be possible to receive a higher amount of dividends without paying any tax. The two approaches do not entirely fit together. Again, it demonstrates an incoherence. On the one hand, one part of the Treasury is attempting to address the difference between the two structures, while on the other it is raising the higher rate threshold, which I support, and encouraging more sole traders to incorporate. The problem remains much the same.
	I am also unclear on the Government's defence of the changes when they state that they are tax neutral. They say that the increase in rates will always be put into increased allowances for small businesses. Of course it will apply only to small businesses thatinvest, but that does not mean that it will target entrepreneurial companies with the potential for growth. A consultancy may well not be the type of business that can invest heavily, yet may be exactlythe sort of potentially high-growth entrepreneurial business that the Government should try to encourage, and profess to want to encourage.
	During our debates on the Budget, Conservative Front Benchers made clear that we would oppose those changes, and I have a distinct recollection of Ministers' saying, "Well, that is a £1 billion hole in the public finances." Unless I am missing something, I cannot quite see how opposing a tax-neutral proposal will create a £1 billion hole in the public finances, unless there is an additional argument about tackling avoidance. If that is the case, I can see where Ministers are coming from, but it still means £1 billion of extra taxes that would not otherwise have been imposed on small businesses.
	Small businesses are vital to our economy. They are a potential source of larger businesses, and they nurture an entrepreneurial spirit. However, they also suffer disproportionately from high compliance costs. One of the reasons why they have suffered in recent years is ever-increasing tax complexity. If we are to have a Budget and a Finance Bill for small businesses, we must tackle that complexity and reduce the compliance burden, whether in tax or elsewhere. That is how we can best preserve and nurture our small businesses.
	If the Government are not prepared to reduce the tax burden on small businesses as a whole, which is what will happen if they do not address the issue of incorporation, a more fundamental and careful review of our taxation system will be necessary. In a piecemeal manner, by adjusting rates here or there, the Government are trying to address the conundrum of corporation tax. However, there may come a time when we shall need to examine the issue more fundamentally, and perhaps consider altering the schedular way in which tax is calculated so that distinctions between taxation of companies and taxation of individuals diminish. A competitive and friendly tax environment is vital for small businesses. The Budget and the Finance Bill have failed to provide that environment.

Philip Dunne: It is a pleasure to follow my hon. Friend the Member for South-West Hertfordshire (Mr. Gauke), who, in his forensic manner, managed to explain some of the inconsistencies in the Government's approach to incorporated businesses, unincorporated businesses and sole traders. I intend to say a little about that as well.
	Members will be pleased to learn that in the time available to me—which I regret to say is rather less than the amount in which others have been able to indulge—I shall not undertake a tour d'horizon of the Bill and the Government's economic record. I want to focus on specific measures that stem from a belief expressed earlier today in the Chief Secretary's remarkable claim that the Bill "strengthens investment incentives for small companies". I think that that is what he said, but, as I shall explain, it is fundamentally not what the Bill achieves. It may be the intent, and the intent is very noble, but it will not be the outcome.
	I remind the House of my interest declared in the Register of Members' Interests.
	Commenting specifically on these aspects of the Bill, the Institute of Chartered Accountants has said
	"We are particularly concerned that measures announced in the Budget will impact on the ability of SMEs to raise finance for investment and will also increase the after tax cost of that investment in cash flow terms."
	That is the fundamental problem. Three measures lie at the heart of the problem, and I shall focus on two. The first is the abolition of industrial buildings allowances and agricultural buildings allowances as the quid pro quo for the changes to the smaller companies' corporation tax rate. What will be the consequenceof that? Those allowances respond to investment decisions for substantial capital spend that are not made overnight. It can take several years in some cases, and certainly many months, for a business to commit to a substantial investment of that kind, and to remove the allowances overnight without any interim arrangements is misguided and will introduce uncertainty into investment decision making. Business investment in this country will suffer, particularly in respect of small businesses.
	The Government claim to support innovation and entrepreneurship, and I support that, too; it is a laudable objective. They have made a reasonable stab at supporting it, but judging by the number of VAT registrations they are not doing as well as they did when they inherited the economy that we left themin 1997. I will not make any further historical references—other Members have done that—but let me point out that there were some 15,000 fewer new VAT registrations in 2005, the most recent year for which figures are available, than there were in 1997, and that there are some 7,000 more deregistrations per year than there were in 1997. That suggests that entrepreneurial activity is in decline, rather than growing. However, I accept that not all VAT registrations are for business; they are for charities and other non-business purposes as well.
	The Government have got themselves into a muddle over the form of business activity that they are seeking to encourage. According to Department of Trade and Industry statistics, some 12 per cent. of businesses are in the form of partnerships. Unincorporated businesses comprising more than one principal are partnerships, of which there are more than 500,000, and there were 515,000-plus in 2005, out of 4.3 million businesses in total. Therefore, there is a significant amount of such businesses, and they range in size.
	The hon. Member for Dundee, East (Stewart Hosie) referred to small-scale business activity in Scotland, and the same pattern exists across England, although the proportion of larger businesses in the rest of the United Kingdom is higher than it is in Scotland. However, there are 13 per cent. fewer partnerships than there were in 1997. I suspect that, in part, that reflects the point of my hon. Friend the Member for South-West Hertfordshire about the drive for sole traders and small businesses to incorporate to take advantage of previous Government tax incentives.
	The proposals contained in what are called the "sideways loss" measures in the Budget could have a significant impact. They could have ramifications that go far beyond the Government's acknowledged intent, which is to prevent avoidance—they fall within the anti-avoidance section. All Members are in favourof clamping down on avoidance, but why are the Government singling out the partnership structure for special penalties, and where is the logic in their position that they should treat unincorporated partners so harshly compared with incorporated businesses or sole traders? There is no logic in that; it appears to be a jumble.
	The Government have perceived that there is an avoidance problem and, as usual, have adopted an all-embracing measure to try to clamp down on it, ignoring the impact that it will have on bona fide business. It is curious that they are seeking to introduce rules that will drive legitimate business offshore. I am aware of examples of substantial investments by individuals that will now be taken offshore because they do not trust the tax regime enough to make the investments onshore, as they have done previously—or these measures might stop them getting off the drawing board in the first place. My hon. Friend the shadow Chief Secretary cited one or two examples in her remarks, which illustrated that point. I fear—it gives me no pleasure to say this—that these Treasury Ministers have such little experience of the real world of business that they cannot rein back the zealots in HMRC from whom, I assume, these anti-avoidance measures originate. I do not imagine that Ministers think them all up themselves. The Revenue identifies an abuse and comes up with a solution, but there is a lack of practical business experience among the Front Bench team, who are not prepared to stand up to the Revenue and say that it is overstepping the mark and that its proposals will have unintended consequences. I do not believe that such thought processes go on, although I would be delighted to be corrected by the Paymaster General when she winds up.

Philip Dunne: The hon. Gentleman is right that it is appropriate to clamp down on specific schemes that are set up to avoid the rules. I have no argument with that, but it is not the point that I am trying to make. The point that I am seeking to demonstrate—I shall give one or two examples—is that many bona fide commercial activities between partners will be constrained and, frankly speaking, stopped by these measures. Those activities should not be stoppedand the solution should be to introduce alternative measures, such as perhaps a clearance or other mechanism, which may already exist in other areas of the tax code, to allow them to take place.
	Hon. Members have mentioned the farming industry. Many farms are run as partnerships between members of the same family and the partnership structure is used to allow interests to change over time as the younger generations come in and the older generations retire. The interests of the partnership can be altered through the life of the partnership, andthat is an attractive way of managing affairs. New partnerships are often set up when a new member of the family begins to participate. Unfortunately, farming follows the biblical pattern—I know that, as a farmer myself—and some years one makes a loss. One can often have losses in the early years of a new partnership. It would be wrong for such activity to be made non-deductible when one would have to pay tax if one were lucky enough to be making profits in the early years of a new farming partnership.
	Another example is the biotech industry, a high risk industry in which some individuals may be prepared to take significant risks with large amounts of money. That risk should be reflected and, if it goes wrong, individuals should have the chance to offset the losses on those substantial risks against their other income. Another example would be the hotel industry. When one sets up a new hotel, one generates losses in the early years while one builds up the room rate. I am aware of examples in which individuals have decided to go into business together as one of them alone cannot raise sufficient money to launch a hotel. People therefore group together in partnerships because it is a good structure.

Philip Dunne: The right hon. Lady shakes her head, but that is the case. Mike Warburton of Grant Thornton has indicated that about £300 million of investment in carbon trading schemes and wind farms will be put at risk by the Chancellor's decision. I do not imagine that either the right hon. Lady or the Chancellor want that to happen.
	Several aspects of the relief seem completely arbitrary and bizarre. The first is the 10-hour limit for an active partner in an investment scheme—10 hours' work per week is required to demonstrate that a person is a bona fide investor. That limit will exclude inactive partners from investing in a business. Many entrepreneurial individuals, such as those featured in the television programme, "Dragons' Den", might invest in the form of a partnership structure and provide entrepreneurial flair and drive, as well as access to their time, but not 10 hours a week to oversee the business. I use that example because it will resonate around the House. A large number of business angels, operating in large and small groups, provide money and specialist advice to small businesses setting up on their own. Those individuals are increasingly tending to use the partnership structure, but they will be unable to do so in future because they will not be able to provide the 10 hours required to qualify.
	The second arbitrary aspect is the limit of £25,000 for eligibility for relief, even though many projects involve individual investments of substantially more than £25,000. I cannot imagine where that sum came from—it seems to have been magicked from thin air—but it will mean that such investments will be made only in tiny projects. The amount is unrealistic in terms of help for small businesses getting off the ground, and if the Government insist on retaining the regime the limit should be raised to a much more meaningful amount. I propose £1 million.
	Another aspect of the relief that will have a substantial impact on reducing business investment relates to the proposals for the venture capital trust industry. I understand from the Red Book that the provisions were imposed on the Government by the EU, but that it was done in a mealy-mouthed way. The Government have not stood up to the EU and have chosen to define the state aid rules inappropriately. There are 110 venture capital trusts in Britain. In 2005-06, they raised £750 million; in 2006-07, the tax year that has just ended, they raised only £110 million. The reason is that the measure was introduced in the last few weeks before the end of the tax year when most of the money comes in, so we can already see the impact of the proposal. Raising funds in that industry has ended because the amounts that can be invested in an individual company are too low. A substantial equity gap will be created between those who can invest £25,000 under the sideways loss relief limit and up to £2 million through a venture capital trust and the commercial, private equity development capital finance provided at the higher end.
	In conclusion, it is particularly damaging for venture capital trusts that the Government chose to interpret the EU state aid rules with a limit of 50 employees to define a small company, even though it was open to them to have chosen a limit of 250 employees as the medium company size. Why on earth did not they choose the larger number? It would have allowed far more companies to participate in venture capitaltrust investment in future and allowed the prospectof continuing a viable industry, which I fear the Government will shut down.

Stewart Hosie: The Chief Secretary, in his introductory remarks, said that the Treasury team was managing the economy based on an immovable constraint. He was then interrupted by an intervention, but I suspect that he meant that borrowing had to be kept at 40 per cent. of GDP, and the Government claim to have done that. I mentioned the £169 billion of private finance initiative liabilities up to 2030-31, and I would be fascinated to find out what the capital borrowings are that lead to that amount of repayment liability. How much of that is off balance sheet? How much of it should actually be on balance sheet? What is the real level of indebtedness?
	Clause 1 set outs the income tax rates for the forthcoming year, which are unchanged on last year, although one would have been hard pressed to identify that fact from the comments of the Chief Secretary or the Budget speech itself, in which the Chancellor laid out his personal tax-raising agenda, which will take£16 billion from 2008-09 and 2009-10 from the removal of the 10 per cent. rate and a further £2.5 billion from changes to national insurance contributions. It has been calculated that those changes will cost 52 per cent. of the employed in Kirkcaldy and Cowdenbeath, the Chancellor's own constituency, an increasing tax bill every month.
	These damaging personal tax-raising changes do not come into being until next year and thereafter, butthe reduction in the main rate of corporation tax,from 30 to 28 per cent., does and that is welcome. Unfortunately, the following years will also see rather brutal changes to the general plant and machinery capital allowances, and those allowances must be taken alongside the welcome reduction of the 30 per cent. rate. Between 2008-09 and 2009-10, at £3.76 billion, the changes to plant and machinery allowances alone will bring in more revenue than the £3.6 billion in corporation tax reductions. Furthermore, the increase in clause 3 in the small companies rate to 22 per cent. will generate £1.2 billion over the next three years. Therefore, this Bill, which paves the way for the entire Budget, will see a massive hike in business taxes.
	Those business tax rises will do nothing to enhance competitiveness, an issue that has been touched on by many Members in the debate, and that matters particularly in Scotland. We have had a 25-year growth gap. Since 1980, growth in Scotland has been 1.8 per cent. on average as against 2.3 per cent. in the UK. Since Labour came to power, the situation has got worse with 2 per cent. average growth in Scotland compared with 2.8 per cent. for the UK as a whole. That means a 30 per cent. growth gap over time. The additional business tax burdens in the Budget and paved for by this Bill will simply make matters worse. Tellingly, the new annual investment allowance, the research and development tax credit increase and the small and medium-sized enterprise tax credit increase will not kick in until the following year. As ever, with this Government, it is jam tomorrow.
	Clause 49 on the definition of a small and medium-sized enterprise will allow only a few hundred companies in Scotland with between 250 and 500 employees to benefit. There are 265,000 businesses in Scotland, and the vast majority of them are very small, but they create 51 per cent. of all of the jobs and they generate 41 per cent. of all revenue in the country. However, 98 per cent. of those businesses have up to49 employees; 1.3 per cent. have between 50 and249 employees; and 0.85 per cent., which comes to about 2,000 businesses, have more than 250 employees. We know that 1,500-odd companies have more than 500 employers, so barely a few hundred of the 265,000 companies will benefit from the allowances announced with such a flourish in the Budget speech.
	Clause 12 deals with the air passenger duty. It is expected to raise an extraordinary £3.3 billion over the next three years yet it is likely to deliver little of the stated benefit of a significant reduction in airborne carbon emissions, not least because it applies only to flights originating and ending in the UK. Of course something must be done, but I am not sure that it is this. Moreover, the measure takes no account of the lifeline services to remote rural and in particular island communities, whose businesses are almost wholly dependent on vital lifeline air services.
	Clause 25 and schedule 3 on managed service companies were mentioned by many speakers today and rather dismissed by several Labour Members. I am deeply worried that people who are effectively self-employed but who work through a managed service company to facilitate their contracts, tax returns and tax payments will be deemed to be employees and will be taxed accordingly. Included in this is an additional tax yield of £350 million this year and almost £1 billion over the next three years, and there is a very real suspicion that this is simply a tax raising measure, rather than an anti-avoidance measure.
	I understand that a large number of the people who may be affected by the provision work in IT as independent freelance IT contractors and consultants. I also understand that one in four of those work for Government Departments or local government departments. If they are expected to bear an additional cost burden, it is almost certain that that additional cost will be passed on to the employer—a Government Department or local authority department—and there will be a corresponding requirement for more spending by Government in order to pay for the consequences of the change to managed service companies.
	The Conservative amendment states that the Bill
	"fails to equip the UK to compete"
	with the ever-increasing competition from abroad. I agree. The business tax rises in particular are a disincentive for competition. The amendment goes on to say that the Bill
	"penalises small companies with higher tax rates"—
	that is self-evident, and it offers
	"a more complicated tax system, hits freelance workers with more tax bureaucracy",
	as I have just described. I agree entirely with that.
	When the amendment states that the Bill
	"does nothing to tackle the UK's worsening pensions crisis",
	it perhaps overstates the case, but I have set out our suggestions and what the Government failed to do in the Budget speech in respect of pensions.
	The amendment argues that the Bill
	"misses the opportunity to provide effective mechanisms for tackling climate change".
	That is worth repetition. There are measures in clauses 10 to 24 on fuel duty, vehicle excise duty, air passenger duty, energy saving for houses, microgeneration and so on, but the big questions and the big decisions that the Government could have taken, which have been flagged up any number of times to Ministers from the Opposition Benches, and which have been repeated from the Front Bench in two subsequent Budgets and two subsequent pre-Budget reports—about finding the funding mechanism to support the carbon capture and storage project at Peterhead—were missed.
	The two issues that the Government could have addressed, the inequity in connection charges to the grid to harness the massive power of offshore wind generation and at last finding a funding a mechanism to support the Peterhead CCS project rather than re-announcement after re-announcement, year after year, in Budgets and in pre-Budget reports, have been wholly missed.
	The Bill and the Budget from which it was derived were rather well summed up on Budget day by Carol Undy, the Federation of Small Businesses national chairman. She said:
	"This is the Chancellor's eleventh Budget and this year's offering is no different to the others—he gives with one hand and takes with the other. However, this year, after some welcome initiatives for our members he throws it all away with a tax hike aimed at small businesses."
	The problem is competitiveness. The problem in Scotland is a growth gap. We have seen modest changes in terms of a reduction of 2p in the top rate of corporation tax. We have seen the small company rate increased and personal tax increased.
	Carol Undy of the FSB got it right, which is whythe Bill and the Budget from which it flows are so dreadfully disappointing. It is smoke and mirrors, a tax raising Budget and a tax raising Finance Bill. They will do nothing to help competitiveness and nothing to help hard-pressed families, who will pay more tax, not least the 52 per cent. of low and modest earners in the Chancellor's own constituency. That is why, if it is pressed to a vote tonight, we will oppose the Bill.

Si�n James: I would like to take this opportunity to talk about how the Finance Bill will help to tackle child poverty and help working families in my constituency and many others like it. I have been proud of my Government's efforts in this area, and of the Chancellor's role in supporting and sharing the prosperity of this nation with those who too often have been left behind. When I meet people in my constituencya typical Welsh working-class communityI often hear about how well they are doing. They know that a strong Labour Government helped to deliver the services that they need and the opportunities for them to prosper and grow.
	The right hon. Member for Wokingham (Mr. Redwood) urged us to look forward, not back. But what I hear when I am out and about in my constituency is, We can't go back. Look at all the things that have improved for us. Look at all the ways in which our lives are getting better. We're afraid that if we go back to what was there before, we'll suffer. I have often heard the simile that life is like trying to drive a car without a rear-view mirrorone does not need a rear-view mirror, but it is very useful. We need to look forward, but every so often we need to have that reassuring glance towards the past.
	People understand full well that only a Labour Government can deliver on their behalf and ensure that their future prosperity is taken care of. I am thinking of the difference between now and the time when I worked with families who needed the support of a charity such as Save the Children. I had to go out into communities across Wales. I worked in fundraising and supported hard-pressed families who had lost hope. They had lost the chances that life had given them. Perhaps they had not had the opportunities that others had had. I know that I do not want to go back to that.
	The security of good employment, low mortgage rates and sustained economic growth is allowing people to prosper and to plan for the future. They tell me what a difference child tax credit, working tax credit and pension credit are making to their lives and how confident they are for the future. Yes, we have had teething problems and complaints, but every time when people think about being without those tax credits, they are afraid. In the past there were fears, doubts and worries about jobs, mortgages and savings. I do not see that any longer. I see confidence, hope and proposals for the future.
	In the wake of the Budget, a number of constituents have taken the time to thank me not only for what the Government are doing, but for what the Chancellor has done. They recognise that the Chancellor has invested in families and communities. Under the stewardship of the most successful Chancellor of the Exchequer this country has ever seen, they have seen those differences. The Finance Bill will play a key role in ensuring the continued prosperity of this country and will help even more working families and children to achieve the best standards of living possible.
	In Swansea, East, the figures speak for themselves. It was an area of high unemployment and it suffered huge changes after the loss of the heavy industries. We now have 2.9 per cent. unemployment. If somebody had told us 10 or 15 years ago that we would achieve those low levels, we would all have said, You're dreaming. But we are there, and we have achieved that dream. The employers in my community and my constituency are different employers. The workplaces are different. I visited Admiral insurance, which is a major employer in my constituency. It operates four of its servicesits various companiesout of the SA1 development in my constituency. That is a prestigious development that has happened under this Government and with the foresight of the last Labour administration in Swansea. When I visited, I saw hope. The people there were not talking about how things were not getting better. They were telling me about how their families were prospering.
	Young people have been helped by the new deal, which was opposed by the Opposition. Nearly 3,000 young men and women have joined the new deal and benefited from the guidance and advice on offer. The Bill will provide further support to families. Such investment is crucial. The child element of the tax credit, which will be increased by 150, will help even more children. Already that has made a difference to more than 10,000 children in my constituency. There are challenges, but the benefits are visible to everyone.

Si�n James: I thank the hon. Lady for that intervention, but we must encourage people to take up any opportunities that exist. People are not takingup various tax benefits and opportunities. The rateof take-up of the child bounty is not good in my constituency. We must use publicity to encourage people to take up everything to which they are entitled. The people of my constituency look to the Labour Government to do that.

Madeleine Moon: Has my hon. Friend found that the child trust fund has ledto a change among families? Young families in my constituency not only use the trust fund, but add their savings to it. They are investing in their children's future in a way that they would not have done if the fund had not been set up. The fund has made a tremendous difference to their attitude towards saving for their children and their future.

Si�n James: I agree with my hon. Friend about that saving attitude. We must encourage people to take the available opportunities and nurture their ability to think about how they can save and use money positively in the future. We want their children to benefit and to get the saving ethic as soon as possible. However, we need even more people to take up child tax credit and the child trust fund.
	It is not only families and children who have benefited and will benefit further. The increase in pension tax allowances will take 600,000 pensioners out of paying income tax. Again, the message from pensioners whom I meet in my constituency is that there have been significant changes and improvements in their lives. They realise that a Labour Government have taken care of them and helped them to achieve a better quality of life.
	Nearly 5,000 pensioners in Swansea, East are in receipt of pension credit, which gives them an extra49 a week. More than 11,000 households receive winter fuel payments. What matters to people is the help in their pockets, and how they can improve their lives. Of course I welcome all the improvements. I would have liked the Chancellor to have been even more generous to families and children, but I realise that he has done everything that he can to help as many people as possible.
	We as a Government have made a difference tosome of the poorest people in our communities. I am confident that we will continue to deliver good job opportunities and financial support for working families, children and pensioners, and will ensure that everyone benefits from the success that we enjoy in Britain. I commend the Bill to the House and hope that it has a speedy passage.

Mark Francois: It is a pleasure to sum up for Her Majesty's Opposition followingan interesting and at times lively debate. It is alsoa pleasure to speak from the Dispatch Box onSt. George's day. As it appears that I have some time available, I will do my best to refer in turn to each of the dozen contributions that we have heard.
	The Chief Secretary to the Treasury began hisspeech in his usual genial manner, which the House appreciates, although he took some friendly fire from the right hon. Member for Birkenhead (Mr. Field). He did his best to justify the Government's tax breaksfor zero-carbon homes. Although he got into a bit of trouble over that on Newsnight last year, he told the House today that some zero-carbon homes are being built in his constituency at a place called Gallions Park. Unfortunately, he was not able to tell us exactly how many homes were being built, so, if the House will forgive me, I shall say that under this Chancellor we still do not know how many zero-carbon homes we get to the Gallion. I hope that the Financial Secretary will be able to give us the precise figure in his winding-up speech.
	We then heard the feisty speech of my hon. Friend the Member for Chipping Barnet (Mrs. Villiers), the shadow Chief Secretary to the Treasury. She firmly championed the role of small businesses in the economy. In particular, she stressed our reservations about the serious extension to the powers of Her Majesty's Revenue and Customs set out in part 6 of the Bill, and I will return to that subject in greater detail later. We next heard from the hon. Member for Newcastle upon Tyne, North (Mr. Henderson). Helists economic policy among his interests in Dod's Parliamentary Companion, and that was borne outby his speech, which lasted 46 minutes. He took interventions from a number of my hon. Friends about levels of inflation throughout history, but I remindhim that today inflation in the United Kingdom is above that in France, Germany and Italy, abovethe EU average and the Organisation for Economic Co-operation and Development average, and above that in Japan, Canada and the United States. That should be a matter of serious concern to Members of all parties, irrespective of what colour rosette they wear on election day.
	We heard next from the hon. Member for Falmouth and Camborne (Julia Goldsworthy), who spoke for the Liberal Democrats. In fact, she was the only Liberal Democrat to make a speech in this important debate. She was given an award for brass-necked cheek by the hon. Member for Wolverhampton, South-West (Rob Marris), and he does not give those out lightly. I will not pursue that further; I will leave him to discuss that with her outside the Chamberbut she did appear to make up Liberal Democrat policy on the hoof when she said that the Liberal Democrats did not want a Finance Bill each year. I did not know that that was their policy, but we are now informed of it. She also described this year's Finance Bill as a bit of a damp squib. I have to disagree with her, because there are some worrying aspects of the Bill, as I hope to goon to explain.
	We then heard from the hon. Member for Wolverhampton, South-West. Last year he spoke for almost an hour in the Finance Bill Second Reading debate, and he repeated that feat today. I owe him a personal apology, as I popped out of the Chamber briefly for a bowl of soup in the middle of his speech.I am sorry about that, but I did so secure in the knowledge that he would still be on his feet when I came back, and as it turned out, I was right. He has become a stalwart of the Finance Bill process, so we look forward to seeing him upstairs in Committee with his well-thumbed copy of the explanatory notes, and we look forward to him joining in our debates as we go through the Bill clause by clause.
	We then heard from my hon. Friend the Member for Hornchurch (James Brokenshire), who I notice is the star of this week's edition of  The House  Magazine. He, too, stressed the potential impact of the Bill on small businesses and on the difficult decision of whether to incorporate. In that context, it should be remembered that the Chancellor, by introducing the zero rate, actively encouraged individuals to incorporate, but when many businesses followed his advice and rushed to incorporate, he effectively decreed that that represented tax abuse, so he abolished the zero rate last year in order to combat that abuse. That seems a curious way to behave if he wants to encourage stability in the tax system.
	We then heard from the hon. Member for Stoke-on-Trent, South (Mr. Flello), who I am sure is on his way back to the Chamber. He spoke principally about his constituency, but he mentioned some aspects of local taxation, including that in the United States. I should like to remind him when he returns that, in terms of national or federal taxes, the United Kingdom has a much longer tax code than the United States. However, I agree with him on one point: the United Kingdom is undoubtedly better off outside the euro than in it.
	My right hon. Friend the Member for Wokingham (Mr. Redwood) spoke brieflyas he put itfor an hour and five minutes, and he spoke, as ever, with considerable experience. He, too, praised the fact that the United Kingdom has remained outside the euro, but the real reason for that is what is sometimescalled the sixth economic test: it is about whether the Government believe that they could ever win a referendum on the euro. In poll after poll, the British people have proved determined to retain their currency, the pound sterling. The principal credit for keeping it goes to them, and not at all to the Chancellor of the Exchequer, who continues to spend money on euro preparations within the Treasury.
	My hon. Friend the Member for South-West Hertfordshire (Mr. Gauke) was the only member of the Treasury Committee to make a speech. I find that a little surprising; nevertheless, I commend him for his contribution. He, too, focused on the effect of the Budget and the Finance Bill on small businessesa theme that received recurrent attention.
	My hon. Friend the Member for Ludlow (Mr. Dunne) also stressed the likely effect of the Bill on small businesses, including business partnerships. He talked about the need for Ministers to exercise close controlwhat my old sergeant major would have called gripover the activities of Her Majesty's Revenue and Customs. He specifically called for a motive test relating to sideways loss reliefa positive suggestion that we may want actively to pursue.
	The hon. Member for Dundee, East (Stewart Hosie), who speaks on these matters for the Scottish nationalists, supported several of the points in our reasoned amendment. I therefore hope that he and his hon. Friends will support us in the Lobby against the Government.
	Finally, the hon. Member for Swansea, East (Mrs. James) talked about so-called teething problems with tax credits. With respect, if half the payments in the system being wrong is a teething problem, I hate to think what would happen if it went seriously awry.
	As with most Finance Bills, particularly fromthis Chancellor, there is a great deal of detail to consider, and we look forward to investigating that in Committee. Last year we spent a considerable amount of time debating the introduction of the new real estate investment trusts, or REITs, regime. That has now gone live, and I look forward to debating the Treasury's proposed tweaks to the regime in clause 51 and schedule 17 with the Economic Secretary, whom I welcome back to his place.
	We have several more general concerns about what is in the Bill and about the important economic issues that it has plainly failed to address, and I should like to turn to some of those specifically. To start with, the Bill does comparatively little to assist small businesses. Although the Chancellor has followed our suggestion of reducing the headline rate of corporation tax totry to maintain our international competitiveness, in contrast he has begun progressively to increase the small companies rate from 19 per cent. to 22 per cent., forcing entrepreneurs to pay more tax, not less, asthey attempt to grow their businesses for the future. Small businesses, which the Department of Trade and Industry defines as enterprises employing 50 peopleor fewer, are very much the motor of growth inour economy. According to the Federation of Small Businesses, they now employ more than 50 per cent. of the entire private sector work force, and it is apparent that these changes will hit them hard. In fact, as the Federation of Small Businesses said of the Budget in a press release entitled, Budget speech dismays small business, this is a
	tax hike aimed at small business.
	As it puts it, what the Chancellor
	gives with one hand he takes with the other.
	Similarly, Nick Goulding, the chairman of the Forum of Private Business, said of the increase in the small companies rate:
	The increase in corporation tax is a kick in the teeth for Britain's small businesses.
	My hon. Friend the shadow Chief Secretary spent some time on this subject, so suffice it to say that we shall return to it in the Committee of the whole House and upstairs in Committee thereafter.
	Part 6 contains potentially significant extensions to the powers of Her Majesty's Revenue and Customs, including extending powers of arrest and surveillance across the combined HMRC organisationeven including an ability, as outlined in clause 96, for HMRC to penalise taxpayers when it thinks that they have done something wrong. As Anne Redston of the Chartered Institute of Taxation pointed out in  Accountancy Age on 5 April,
	You can't levy a penalty on something HMRC thinks happens.
	She goes on to say:
	If you've done something, or failed to do something then you have a fact, but if they think something has happened how can you appeal?
	The powers of arrest partly result from the mergerof Customs and Excise with the Inland Revenue. Although the Treasury has apparently told the professional bodies that it intends the powers to be limited in scope and used sparingly, few such safeguards are included in the Bill. It is therefore unsurprising that we have strong reservations about the operation of the proposals in practice, not least given HMRC's increasingly heavy-handed method of dealing with taxpayers in relation to tax credit appeals. We will press the Government for safeguards on the way in which the powers, if the House grants them, operate in the real world, including their effect on the relationship between HMRC and the Serious Organised Crime Agency in combating organised fraud. We will shortly table amendments on the subject for consideration by the Committee of the whole House next week.
	Like most of the Chancellor's finance measures, the Bill contains considerable anti-avoidance provisions, which are included in parts 3 and 5. It is part of a trend under the Chancellor to see a tax avoider around every corner and to devise an increasingly complex tax code to try to prevent that. Tolley's Tax Guide, which is often called the accountant's Bible, has expanded correspondingly to try to keep up with the raft of additional tax legislation. The Chancellor's inherent love of complexity means that it has doubled inlength since 1997 and now stretches to four rather than two volumes.
	I can confirm to the House that, under the present Chancellor, we have finally become a world beater: thanks to his love of complexity, we have thelongest national tax code in the world. In 1996, PricewaterhouseCoopers, in conjunction with the World Bank, published an analysis of national tax codes around the world. It showed that the UK's code stretched to 8,300 pages, surpassed only by India, with a notoriously complex tax code, at 9,000 pages. Japan was third with 7,200 pages, while Switzerland barely got on to the pitch with a mere 300 pages of code.  The Economist highlighted all that when its 11 November 2006 edition pointed out:
	Of the world's 20 biggest economies, Britain is second only to India in the number of pages taken up by its primary legislation.
	Since then, the Indian Finance Act 2006 and the 2007 Finance Bill have added a little under 300 pagesto the Indian national tax code. However, back ingood old Blighty, the Chancellor's Finance Act 2006 contained 180 clauses and 26 schedules, which stretched to 517 pages. The tax law rewrite project prepared the Income Tax Act 2007, which helped to clarify some of the Chancellor's complex tax law in simple English and even repealed some 250 pages of it. However, to do that it added a further 1,100 pages of clauses, schedules and tables to the tax code.
	The Bill piles on another 113 clauses and 27 schedules, which represent another 305 pages. In comparison with India's nearly 9,300 pages of national tax code, the United Kingdom's stands just short of 10,000 pages. The Chancellor, who always says that he wants to reduce red tape, has burdened the British people with the longest national tax code in the world. When the Financial Secretary responds to the debate, perhaps he will confirm that under his boss we have become a world leaderbut as champions of complexity rather than clarity.
	The abolition of the 10p starting rate tells a similar story. The Chancellor rushed it through on Budget day in the hope that no one could follow him while he did it. How many of those Labour Members who cheered so loudly on Budget day and waved their Order Papers so enthusiastically realised that they were supportinga tax increase for those on low incomes? How many had worked out what the Institute for Fiscal Studies subsequently told us: that more than 5 million householdspredominantly those on lower incomes would be worse off as a result of the Chancellor's Budget and the Bill? How many are happy to go back to their constituency Labour party executives and champion that?
	The net effect of those measures is actually to increase taxation on lower-paid families and that must drive ever more of them into the Chancellor's highly complicated tax credit system, in which we now know that more than half of all the payments are wrong. More than 333,000 people appealed last year against the attempted recovery of an over-payment and fewer than one in 20 are likely, on the latest figures, to succeed. The tax credit system devised by the Chancellor is crying out for reform [Interruption.] The Economic Secretary shouts out abolition from a sedentary position. No, it needs to be reformed, and90 Labour Back Benchers signed early-day motion 545, calling for reform of the tax credit system, particularly for the reform of the handling of overpayments.
	One of the signatories of that early-day motion is the right hon. Member for Birkenhead. In an article entitled, I won't make life easy for Gordon by defecting, in  The Spectator of 24 February, he said:
	Gordon has been wrong on Pensions, we've run our course on Tax Credits, there's no more money and we've enveloped huge sections of the population in means tested benefits; there ain't any future in this. There is a need for a mega rethink, and there is a need for a leadership contest.
	Indeed. In the same article, when the right hon. Gentleman was asked whether he had considered defecting, he replied:
	I am not moving. That is not to say that I am happy in the Labour Party. Who is?
	In fairness, he then flatly rejected the idea of leaving Labour entirely, but mainly on the ground that he did not want to give the Chancellor the pleasure.
	We then come to the vexed topic of pensions. The Finance Bill contains some measures that relate to pensionsfor instance, three clauses in part 4, including those relating to changes in alternatively secured pensions or ASPs, as they are generally known. However, the Bill does little or nothing to address the massive damage done to the UK's pension system by the Chancellor's 5 billion a year smash and grab raid on our country's pensions.
	When we debated the topic last week, the extraordinary thing about the Chancellor's performance was his absolute and total refusal to say sorry. Despite the misery thathe has caused pensioners up and down this country, there was not a hint of contrition or regret. If he is confident about what he has done on pensions, why has he had to spend two years and a considerable amount of taxpayers' money fighting the release of papers under freedom of information legislation? When challenged and put on the spot, all the Chancellor could manage was to blurt out that Labour had introduced the Freedom of Information Act in the first place.
	When the Chancellor's own Treasury civil servants warned him prior to going ahead with the change that the
	actuarial valuation of the pension scheme assets would fallby up to 20 per cent.; this would cause a shortfall of up to75 Billion,
	what part of that statement did the Chancellorand the Economic Secretary, who was advising him at the timenot understand? The Economic Secretary's hurried defence of the decision was that it had actually been done at the behest of the CBI. Subsequently, that was flatly denied by the CBI's then director general, Adair Turner, who, on The World at One on 2 April said:
	Let's be absolutely clear, the CBI never lobbied for an end to tax relief at any time whatsoever in 1996 or 1997.
	I remind the House that, whenever we debate pension changes in the Finance Bill or elsewhere, we have to be conscious that the general public are well aware that, as Members of Parliament, we have relatively generous pension arrangements of our own. For instance, as the Economic Secretary will know well, the hon. Member for Morley and Rothwell (Colin Challen)or the future Lord Challen of Normanton, as we must probably learn to call him, can now look forward to a comfortable retirement, but what about the millions of pensioners who cannot? It is no wonder that the Prime Minister's previous pensions adviser, Ros Altmann, said tellingly:
	The Chancellor will go down in history as the one who destroyed our pensions system. He just ignores what he doesn't want to hear, then tries to cover up the consequences.
	This Finance Bill is brought to us by a Chancellor who is in denial about the misery that some of his measures have caused to ordinary, hard-working families up and down this country. It comes from a man who flatly refuses to apologise for any of this, because he seems to think that humility is a human weakness and not actually a strength. That kind of thinking has led to a poor Finance Bill that does little for pensioners against a background of rising inflation, which has helped to give us the longest tax code in the world but done little for small businesses, and which gives HMRC powers that need to be reined in. In short, it is a Finance Bill from a tired Chancellor, not afuture Prime Minister. In view of the Bill's inherent weaknesses, I urge the House to vote for our reasoned amendment tonight.

John Healey: The specific answer is that there are plans in Gallion Park in the constituency of my right hon. Friend the Chief Secretary for precisely the sort of development that we want to see. [ Interruption. ] The point about the policy is precisely that it aims to encourage behaviour to achieve what we do not already have.
	Turning to the changes to powers for HMRC, in essence, the legislation provides that HMRC should have access to appropriate powers in the provisions of the Police and Criminal Evidence Act 1984, adapted to meet the particular concerns and circumstances of tax investigations. In many areas, the police have powers that will not be available to HMRC, such as the power to stop and search. The hon. Members for Chipping Barnet and for Rayleigh promised detailed scrutiny of the proposals in the Committee of the whole House and in the Public Bill Committee, and we look forward to that, as it is important that we get those provisions right. It is important that proper safeguards are in place alongside the consolidation of those powers.
	The hon. Members for Falmouth and Camborne and for Chipping Barnet accused us of rushing in the provisions on managed service companies. Given the scale of the MSC problem, it was necessary to act promptly, as it was estimated that there were almost 250,000 workers in MSC companies in 2005-06, and that number is rapidly growing. MSC providers, their advisers, employment agencies and accountancy bodies have all discussed the plans with us in detail as part of the consultation that ran from the pre-Budget reportin December to March this year. May I tell the hon. Member for Chipping Barnet that we will, of course, look

John Healey: We have made it clear that we donot intend that the provisionsindeed, we have deliberately drawn them up to this endshould affect those who operate through personal service companies.
	My hon. Friend the Member for Newcastle upon Tyne, North treated the House to an insight into his experiences as a trade union negotiator and cited some of the deals that he used to negotiate, including 27 per cent. wage increases. All I can say is that I am glad that he is a Member of Parliament, rather than operating in the workplace, otherwise I suspect that he would come to the attention of the Governor of the Bank of England. The conclusion that he drew from his experience, both before and since coming to the House was very important: overriding everything else, there is significant value in stability, which the monetary and fiscal framework introduced since 1997 has helped to bring to the UK, which the Organisation for Economic Co-operation and Development described as a paragon of stability. He was right that the major result that matters to most people and certainly to Government Members is jobs, and there are 2.6 million more jobs in the British economy than there were10 years ago. He is right that the challenge for the next decade lies in increasing skills and learning throughout the system to allow those in work to continue in work and those not yet in work and seeking work to gain opportunities for the future.
	On air passenger duty, the hon. Member for Falmouth and Camborne urged me to cite precedents for changes in taxation being introduced before Budget resolutions are debated. I have cited previously inthe House the example of the increase in the supplementary charge on North sea oil and gas. I have also written to the Chairman of the Procedure Committee to underline the point and to explain that, in law, a resolution made under the Provisional Collection of Taxes Act 1968 has the effect
	as if contained in an Act of Parliament.
	That provision has been regularly used by Governments of different persuasions. I will discuss with the Chairman of the Procedure Committee whether he is content for me to place a copy of my letter citing such precedents and examples in the Library.
	My hon. Friend the Member for Wolverhampton, South-West delivered a clinical and comprehensive demolition of the Opposition's amendment and arguments. I hope that I can persuade him to serve on the Bill Committee, although Opposition Membersand perhaps the hon. Member for Falmouth and Camborne in particularmay not be too pleased if he does. On climate change, he made a persuasive and coherent argument. He was an early advocate of the importance of taking into account adaptation to the impact of climate change, and I am glad that, ashe said, his private Member's Bill has largely been incorporated into our draft climate change Bill.
	The hon. Member for Hornchurch (James Brokenshire), who, I am disappointed to see, is not in his place, is a former tax lawyer, and I hope that we will see him on the Bill Committee, although I do notwish to do the Opposition Whips' job for them. He maintained that small companies would have difficulty taking advantage of the tax reliefs because of their complexity. However, the Institute for Fiscal Studies, in its reaction to the Budget, said:
	This is a genuinely simplifying Budget...a cause for congratulation rather than criticism.
	It is true that the annual investment allowancemakes tax simpler for small businesses. Clearly, it is a simplification, effectively giving small businesses, incorporated and unincorporated, a cash flow tax, which has been welcomed by many, including the Federation of Small Businesses, the chairman of whose tax committee said:
	The Annual Investment Allowance will be significant for small businesses, both incorporated and unincorporated, when it comes in from April 2008. It should allow what is in effect free depreciation for small businesses on plant and machinery, and has the added benefit of being a simplification.
	Small firms often say that volatility in cash flow is one of their major headaches and risks. The AIA will offer significant help to make purchasing new assets more affordable.
	My hon. Friend the Member for Stoke-on-Trent, South (Mr. Flello) chairs the Staffordshire taskforce and talked with some expertise about the importance of skills and jobs in his local economy. I will make sure that the chairman of Advantage West Midlands is aware of his points about investment, particularly in office accommodation in his area.
	The right hon. Member for Wokingham treated us to a tantalising taste of the report that he is preparing for his leader. We look forward to the Redwood report on economic reform. I encourage him and those on his Front Bench to take up the idea of publishing it chapter by chapter, and to make sure that it is a question of when and not if.
	I was glad to see the hon. Member for South-West Hertfordshire (Mr. Gauke) make a contribution and keep the Treasury Committee's end up in the debate. He was particularly concerned about the Olympics and the impact of capital allowances. We do not expect the reforms to business tax to have the negative impact that he and some other members of the Committee might fear. As he will be aware, the changes to capital allowances have a largely temporary timing effect. Those will be more than outweighed by the dominant effect of the cut in the main rate that the Bill and Budget introduce. Overall, we expect the Budget changes to have a positive impact on investment levels, including in relation to the Olympics.
	The hon. Member for Ludlow (Mr. Dunne), who sadly and surprisingly is not in the Chamber, wanted to discuss in detail aspects of sideways loss relief. The Committee is probably the place to do that, not a Second Reading debate at this hour.
	The hon. Member for Dundee, East (Stewart Hosie) quoted the Federation of Small Businesses. I shall come on to the business tax reforms and explain why they are likely principally to assist small businesses rather than to hinder them as he fears. He madethe argumentalthough that perhaps flatters him slightlythat the announcements in the Budget would mean R and D tax credit benefits to very few. That is not true at all. The measure in the Bill extends the small and medium-sized enterprises R and D tax credit to companies with up to 500 employees, but the Chancellor's announcement in the Budget, for which we will legislate next year, means that all companies will benefit from an increase in the value of the SME and the large company R and D tax rate from 2008. To date, there have been more than 23,000 claims under the R and D tax credit from between 6,000 and 8,000 companies. That is scale of those who stand to benefit.
	My hon. Friend the Member for Swansea, East (Mrs. James) brought some of the contributions back to reality. She was so clear and so right when she argued that tax credits are an important part of many families' monthly income. Take-up is now 90 per cent. for those on incomes lower than 10,000. More than6 million families and 10 million children are benefiting. She said that they are afraid of having to do without their tax credits. Those fears would certainly be realised if the Opposition ever got their way.
	On the business tax reform, the Leader of the Opposition said:
	Somebody needs to tell the Prime Minister that there are two rates of corporation tax, and the one for small businesses is going up. It will be paid by every firm in the country.[ Official Report, 28 March 2007; Vol. 458, c. 1492.]
	Somebody needs to tell the Leader of the Opposition that the UK has 4.3 million small businesses. Of those, more than three quarters are self-employed. They do not pay corporation tax and are not affected by the changes in the Budget. Of those that remain, around a quarter do not pay any corporation tax because they do not declare profits. Of those that remain, we estimate that the majority have incorporated with the purpose of reducing their tax and national insurance liabilities.
	In all the changes that we have made to small business tax rates and policy, we have done so with a view to having a tax system that ensures that we get greater levels of investment and innovation and a fairness in the system. That was the purpose also of our consultation in 2004. However, the lower rates of tax have resulted in a significant number of people incorporating to take advantage of them, not to invest in business, but simply to extract the company profits in a way that reduces their personal tax and national insurance liabilities. They are doing that while still carrying out the same economic activity that they carried out before they incorporated. The tax break is clearly being subsidised by those companies that are following the rules and by ordinary taxpayers.
	We are therefore refocusing the provision of investment incentives on small businesses. The increase in the small companies rate will reduce the differential in tax paid between the incorporated and the self-employed. The annual investment allowance will target assistance directly on those firms, incorporated and unincorporated, that invested their profits. The Budget is good for business, with the lowest corporation tax rate in the major economies, a small companies rate that will still be lower than the rate when we came to office in 1997, tax incentives focused on businesses that invest and innovate, and a fair deal for the self-employed.
	Over the past decade, Britain's economy has been at the forefront of jobs, stability and growth, and the Bill will help to maintain our competitive economy for the future. Since 1997, Labour has introduced the new deal and tax credits for working families, and has seen more than 2.5 million more jobs in the British economy. The Bill increases the rewards for work and support for families. In the last 10 years, we have seen the United Kingdom lead on international arguments and action to tackle climate change. Now the United Kingdom, almost alone, is set not just to meet our Kyoto targets but to double them. The Bill introduces further measures to protect the environment and to reduce climate change emissions.
	A strong economy, a just society, a duty to future generations in protecting the environmentthis is a Labour Finance Bill, and I commend it to the House.

Question accordingly negatived.
	 Main Question put forthwith, pursuant to Standing Order No. 62 (Amendment on second or third reading), and agreed to.
	 Bill accordingly read a Second time.
	 Ordered,
	That
	(1) Clauses 1, 3, 7, 8, 12, 20, 21, 25, 67 and 81 to 84,Schedules 1, 18, 22 and 23, and new Clauses relating to microgeneration be committed to a Committee of the whole House;
	(2) the remainder of the Bill be committed to a Public Bill Committee; and
	(3) when the provisions of the Bill considered by the Committee of the whole House and the Public Bill Committee have been reported to the House, the Bill be proceeded with as if it had been reported as a whole to the House from the Public Bill Committee. [Mr. Timms.]
	 Committee tomorrow.

That the draft Representation of the People (National Assembly for Wales) (Access to Election Documents) Regulations 2007, which were laid before this House on7th March, be approved.

EUROPEAN SCRUTINY

David Amess: I am delighted to have the opportunity of raising the subject of balanced and sustainable communities on the day on which we celebrate our patron saint, St. George. For so long, Ireland, Scotland and Wales have celebrated their national day. I am delighted that the House of Commons is leading the way in celebrating St. George. I am particularly delighted that this debate coincides with the celebration of our national day, because I represent a constituency that is very patriotic and is celebrating St. George's day. During my brief speech, I want to talk about Southend in particular with regard to a balanced and sustainable community. If the Minister does not have the time to respond to all the points that I intend to raise, I am sure that he will write to me.
	I started preparing for this debate by finding a definition of a sustainable community. I found eight key characteristics. It should be active, inclusive and safe; well run; environmentally sensitive; well designed and well built; well connected; thriving; well served; and fair for everyone. That sounds a pretty good range of things for a balanced community to have.
	A sustainable community is really the antithesis of ghost-town Britain, which has seen the decline of community. That has been well documented of late. It has been highlighted by my hon. Friend the Member for Ruislip-Northwood (Mr. Hurd) in his Sustainable Communities Bill and also by the Communities and Local Government Select Committee in its report on coastal towns. Ten years of top-down centralisation from Labour have frankly added to the cycle of decline in local communities. If people were able to restore their feeling of pride in, and responsibility for, the individual communities in which they live, the quality of those environments and the quality of life of their inhabitants would improve. There can be no better way to build sustainable communities than to involve the people who live in them, so I call on the Government to give a much higher priority to the promotion of sustainable communities than they appear to give at present.
	I find Labour's approach to the Sustainable Communities Bill somewhat puzzling. It reminds me of the Warm Homes and Energy Conservation Bill, which became an Act of Parliament and which I was privileged to pilot through the House in 2000. There are a number of programmes that touch on the notion of sustainable communities, but there is no focused strategy to deal with the problem. I understand thatat least 50 per cent. of Labour MPs support the Sustainable Communities Bill and that, resistingthe not invented here syndrome, the Labour Government have finally decided to back it. I am delighted about that, but I fear that the Government do not have a joined-up strategy on the issue.
	If the Minister wants firm evidence about how serious the situation is, I can tell him that over the past few years 8,600 independent grocery stores have closed, 4,000 bank branches have closed, 200 police stations have closed, 13,000 independent newsagents have closed, 700 doctors surgeries have closed, 162 green-belt developments were approved by the Government, and 20 independent pubs closed every month. In 2005, 70 per cent. of rural parishes had no general store,75 per cent. had no daily bus service, 83 per cent. had no GP, and 43 per cent. had no post office. All that has happened under a Labour Government.
	The post office closures in Southend have had a serious effect because we have the highest number of senior citizens in the country. Throughout the country 3,700 post offices have closed. The Government gave all sorts of reassurances that that would not impact on local communities, but it certainly has done so in the area that I represent.
	Although I welcome the fact that there are now20 PayPoint outlets in Southend, West, where payments can be made in cash or by debit card for television licenses and in cash for most utilities and mobile phone top-ups, I am concerned that those services will not be accessible to the elderly in my constituency, who are not familiar with the new facility. How on earth the Government expect senior citizens to cope with new technology I do not know. As a result of what has happened with post offices in urban areas, only 42 per cent. of people now walk to their post office, down from 70 per cent. before the recent spate of closures.
	The Minister knows more than most, because we had a number of meetings with him about the Southend census. Nothing was done to help my constituents after the 2001 census left 20,000 people off. The subject has not gone away, because it is such a serious matter when funding is provided for 20,000 people fewer than in fact live in the constituency. I do not know how the mistake was made or why I was not alerted to it earlier. It is no good the Government suggesting that the local authority can raise more money. It cannot, because the Government wouldcap it.
	The biggest effect, as the Minister knows, is on buses. Southend residents value their buses, which were being run by First and Arriva. The local authority had to withdraw the subsidy, because it has no money, so services were stopped on the 23 route connecting Belfairs to Tesco and Leigh Broadway, and Arriva stopped an evening and Sunday service along the route from Belfairs to Southend hospital and to the town centre.
	The main candidate for providing the necessary funds had until very recently been Tesco. The Minister will no doubt be intrigued by that. The initial encouragement that I received from Tesco led me to question the assumption that national supermarkets, which are blamed for the identikit high street, are not conducive to sustainable communities. For some time I had been in discussion with Tesco, which had informed me that as a firm it often subsidises local bus services for the benefit of the local community. Unfortunately, after a meeting earlier this year with representatives from Tesco who were sent down t the area by the chief executive, I was given the somewhat contradictory information that Tesco did not subsidise local bus services and would not be making any exception. Dealing with Tesco in that respect over 18 months has been a complete and absolute waste of time. I am very dissatisfied with what has happened. I have a letter from one of the directors of Tesco, reiterating its negative response. In the light of record profits of2.6 billion, I am less than happy.
	On the subject of identikit high streetsI am pleased to see my hon. Friend the Member for Rochford and Southend, East (James Duddridge) in his place, because I was going to refer to his high streetbetween 1997 and 2005, 50 specialist stores such as butchers, bakers and fishmongers closed a week. That has all taken place while we have had a Labour Government. I am not enamoured of identikit high streets and I am fortunate that Southend is not overly afflicted by the phenomenon, but there are certainly many challenges in Southend high street. Independent retailers, starved of business by the big supermarkets, have less money to spend locally and make less demand for local products. That in turn impoverishes local producers. Although I welcome Tesco's surprise announcement on 3 April about increasing the producer price of milk by 4p to about 22p per litre, that is a frightening indicator of the power that supermarkets now have to dictate prices to producers. All of that has happened while we have had a Labour Government.
	Between 1997 and 2002, the number of UK farm workers fell by 100,000, leading to many rural homes being taken over by city commuters, who have much weaker links to the local community and are less likely to spend their money locally. As the country's food infrastructure has contracted, it has become increasingly difficult for small shops to source their goods from nearby wholesalersdairy or abattoir. It therefore comes as no surprise that the distance that the average tonne of UK food is transported has increased from 82 km in 1978 to 128 km in 1999.
	The other point that the Government wax lyrical about is democracy. They have a great deal to say about democracy, but in practice they will go down in history as the most undemocratic Government of the last two centuries. In the run-up to the local elections on Thursday week, we are again exposed to the apathy, I dare say, of the general public. I believe in restoring powers to local councils. The Government have taken all the powers away from local authorities. They are now told what to spend money on and how much money to raise. All their power has been lost under this Government. Restoring powers to local councils and involving the public in consultations, as the Sustainable Communities Bill proposes, would encourage people to take part in the democratic process. The key to building a sustainable community is requiring the active participation of communities and residents, mainly through local authoritieslet us set the people free.
	I am vehemently opposed to the unaccountable power wielded by today's quangos, as are my hon. Friends the Members for Gainsborough (Mr. Leigh) and for Rochford and Southend, East. The hon. Member for Thurrock (Andrew Mackinlay) also has some reservations about the number of quangos in Essex. I welcome the proposals in the Sustainable Communities Bill to make the action of those organisations more transparent. It is not surprising that taxpayers are disheartened by ever-increasing tax rises when they have little control over how money is spent.
	I will end with two points. Southend faces a tough employment situation. I will not go into huge detail about it tonight. The Minister has the evidence inthe latest report from the Communities and Local Government Committee, which shows how seaside resorts have suffered. The fishing industry, which was traditionally an alternative source of employment for residents in Southend, has been badly hit in our area. Quotas introduced this year introduced by-catch limits of 25 per cent. on skates and rays. That threatens to cripple fishermen up and down the East Anglia coast.
	I am informed that, although stocks of skates and rays might be threatened off parts of Britain's coastline, they are in plentiful supply in the waters off my constituency, but they cannot be caught. In 1983, the UK extended its fishery limits to 12 miles. That now clearly needs to be seen to be working. Some24 years later, fishermen in my constituency are seriously suffering. One of the Minister's colleagues recently met a delegation to discuss the situation. The Minister knows from the Select Committee report that a high proportion of people living in coastal towns are claiming benefits, especially incapacity benefit.
	On Friday, I visited Westborough school, which is just about the largest primary school in Essex. The foundation school has been nominated for the sustainable school of the year award. It is an excellent example of how a primary school can make a valuable contribution to the sustainability of a community. It provides support to both pupils and parents in a variety of ways and tries to meet the challenges presented by the diverse urban population from which it draws it intake.
	The character of Westborough school has changed dramatically over the past five years from a predominantly white school to a school in which30 languages are spoken. The school has a long-term vision for the development of its land-locked site and Edwardian building. It has a recycled playground and an environmentally friendly cardboard classroom. It is committed to inclusion and its intake fully reflectsthe diverse, socially mixed community. Every child participates in an inclusive production each year and no ethnic group is marginalised. The school operates an open-access policy for parents, and problems are dealt with on a same-day basis. The school works with local social services and other providers to facilitate the return to education of disaffected secondary school pupils.
	Westborough offers a choice of more than 20 clubs, which are available four days a week and include Spanish, French, reading, sports, art, Latin, chess and cookery. The school runs a breakfast service to ensure that pupils receive a morning meal. Its focus on green and environmental issues is preparing children to be responsible citizens of the future.
	Southend, West has the vital ingredients thatare required for a sustainable community. I ask the Minister to reflect on the powerless position in which the local authority finds itself and to consider whether the Government could do a little more to help.

Phil Woolas: I give my genuine congratulations to the hon. Member for Southend, West (Mr. Amess) on securing the debate, especially because it is being held on St. George's day, our national day. I share his view that it is right to celebrate St. George's day. On Sunday in my constituency, 1,250 of our Brownies, Cubs, Beavers and Scouts celebrated the 100th anniversary of scouting, as did the rest of the country. Such celebrations takeplace on the nearest Sunday to St. George's day, and Sunday was one of the proudest days that I have had representing my constituency.
	I want to give the hon. Gentleman some encouragement. The direction of travel that he is imploring the Government to follow on devolutionor double devolution, as it has been calledis at the heart of the Local Government and Public Involvement in Health Bill, which is being considered by the House. The Bill builds on the local government White Paper that was published in October 2006.
	The hon. Gentleman referred to the Sustainable Communities Bill. The Government did not vote against that private Member's Bill. We are discussing with its promoter and sponsors how we can meet the Bill's objectives of helping to sustain communities in a way that is workable and beneficial. Much merit is claimed for the Bill, ranging from the assertion that it will save local pubs to the suggestion that it will save high streets from voracious supermarkets. Having read the Bill, I am puzzled about how that would be translated into reality. However, its core philosophy is one that we support, and we are considering how to improve the Bill. A number of measures are already in place, or are being put in place, that achieve the goals of the Sustainable Communities Bill. Indeed, debate on the Bill gives me the opportunity to explain to the House in greater detail what those measures are.
	The hon. Member for Southend, West, paints a bleak picture of Britain, and I understand why, but I have to say that if he travelled with me to most towns and even villages on a Saturday night, the phrase ghost town is not what would come to mind. One wag in my constituency said that it was more like the wild west than a ghost town. I share with the hon. Gentleman the concern about the decline of independent shops, and the work of the all-party group on small shops should be commended, but it would be misleading if the Government gave the impression that those problems would be solved simply by passinga private Member's Bill. We have to ensure fair competition, but the supermarkets are successful because they provide consumers with what they want. Some of the supporters of the Sustainable Communities Bill have to marry that support with the idea of a free market economy, but I am certainly not here to bash successful businesses.
	The Government have made significant changes to planning policy, and we believe that they help the situation, particularly with out-of-town shopping centres. I know that that is a big issue in the hon. Gentleman's part of the world; I also know how popular such shopping centres can be, but it is right that planning policy should ensure that town centres and retail centres benefit. That oil tanker has been turned around, and the advent of the new, smaller IKEA stores is the best known example of that so far.
	Some of the figures that the hon. Gentleman gave on closures are gross, and not net. I have learned in my time in ministerial office to be wary of figures that move in that way. Indeed, in a previous incarnation, I used to produce regular figures on the loss of manufacturing jobsit was when the Conservatives were in governmentand I confess that they were gross figures, not net figures. The same survey carries on today, much to my discomfort, so I cannot really complain. In any case, the hon. Gentleman raises a serious point. Two specific issues to do with the census figures were raised by him and by the hon. Member for Rochford.

Phil Woolas: I apologise. The constituency was changed after the Boundary Commission report, was it not? The hon. Member for Southend, West, and the hon. Member for Rochford and Southend, East, raised the issue of the census. Of course, we have to rely on the best figures that are available to us, and the Office for National Statistics is the source of the figures. On the distribution of the money, we simply distribute a cake, as it were, and local authorities and Members have reasonably put their arguments about theirarea's individual circumstances. I have been lobbied by 18 Members of Parliament who have put a unique case, but if there are even just two cases on the same basis, neither can be unique, can it? That is a serious point. The ONS has reported on the work of its working party; it has provided an interim report and is considering how we can deal with the matter.
	We live in an era of multi-year settlements for local authorities. The Government changed the formula in the current round to ensure that there is a greater forward look, and to ensure that we do not just rely on historic trends, so I assure the hon. Member for Southend, West that his lobbying has not been wholly without benefit for his area. Later this year, we intend to announce a three-year settlement for 2008-11, and it is important that the discussions on the population figures continue.
	I recognise the hon. Gentleman's point about seaside towns. Over the decades, we have seen a general shift because of changes in tourism, changes in fishing industries and other factors. That has been highlighted by all-party groups, by the Select Committee on Communities and Local Government and by academic studies such as those from Sheffield. There are often different reasons in different parts of the country, sometimes to do with port trading, fishing or tourism. I suspect that in the hon. Gentleman's constituency it is a mixture of all three. He nods in assent, which confirms my briefing and my personal knowledge of Southend. There are strong arguments and the issue is being addressed, albeit, I recognise, not entirely to his satisfaction.
	The hon. Gentleman raised the issue of concessionary fares. That exposes an important point about devolution. Local authorities and Members of Parliament often argue for devolved powers and against ring-fenced budgets. When the Government provide non-ring-fenced budgets and devolve power, we are often told that the money is not enough, which is the argument on the concessionary bus fares scheme. When the money was provided on a non-ring-fenced basis through the local authority revenue support grant settlement, some councils said that it was not enough. One cannot have one's cake and eat it. If it is such a priority for the local authority, it has to take some tough decisions, just as Governments do. There is further good news, however, because the Chancellor has announced not only a nationwide concessionary fare scheme for buses for the elderly and disabled but a national scheme. Discussions are taking place in Government on how the funding mechanism for that should be handled. Representations made by the hon. Gentleman and others are of course being considered as we work out how the scheme can best come about.
	The hon. Gentleman made a rather startling claim when he said that this Government were the least democratic for two centuries. Universal suffrage has not been around for two centuries. [ Interruption.] The hon. Gentleman says, For two decades. That gives me a get-out, because I think that I would come out on top were he to make claims about the previous Conservative Government, particularly as regards the abolition of councils and interference in local authorities in that period. Indeed, I could refer to the memoirs of Kenneth Baker, who described how he had to tackle, as he saw it, the views of local authorities in the 1980snot a lot of devolution around then.
	The local area agreement, which pools and aligns Government and local government money in local authority areas, is a significant devolutionary measure. Every local authority in England now has such an agreement. Approximately 500 million is channelled into local area agreements, and that frees up local agencies, especially local councils.
	The legislative framework under which councils operate has changed and is changing again with the Sustainable Communities Bill through the key measures of the statutory duty on the partner agencies to co-operate with local councils. Clause 108 provides for a duty to involve, inform and consult, thus fulfilling many of the Bill's goals. Part of my task in Committee is to discuss with members how we can best move forward on that.
	Local authorities' financial and legal frameworks are changing, especially through the measures that I have mentioned. Crucially, the performance frameworkis also changing through the freeing up by the Government and the Audit Commission of the regime under which councils operate.
	The accusation has been made that central Government tied down local government. We introduced tough measures, which, along with the hard work of councillors from across the political spectrum and the extra money over the yearsno one quibbles that it has been provided; many say that it is not enough but none says that it is too muchhave meant a significant improvement in the quality of local authorities. That is not only my view but that of the Audit Commission and other independent bodies.
	We are now in a position where we are feeing up local authorities, especially through the significant reduction of targets. There is a strong consensus in the Local Government Association about that. I therefore believe that I can meet some of the measures forwhich the hon. Gentleman argued but I still resistthe accusation that we are the most undemocratic Government for two centuries.
	 Question put and agreed to.
	 Adjourned accordingly at nine minutes to Eleven o'clock.